Veda owned a diamond necklace.She entered into an insurance contract for coverage of the necklace.Under the terms of that contract,she was required to pay $500 per month.After Veda paid the premium for two months,the necklace was stolen.Her insurance policy covers loss by theft and the insurance company admits that it must pay a benefit to her.That policy,however,contains a "deductible." This means that the benefit that Veda is entitled to receive from the insurance company will be reduced by the amount that she actually paid as premiums: $1000.

Question

Quizplus · Accepted Answer

A deductible is an amount that the policyholder must pay out of pocket before the insurance company pays a claim. It is not related to the premiums paid. The premiums are the cost of maintaining the insurance policy and do not reduce the benefit amount.

Veda Owned a Diamond Necklace