Other Than Life (OTL) Practice Exam

In which situation is a deductible most commonly applied?

1. Fire damage

2. Accident benefits

3. Theft of the entire vehicle

4. Lightning damage

The correct answer is: Theft of the entire vehicle

A deductible is an amount that the policyholder must pay out-of-pocket before an insurance policy provides coverage for a claim. This practice is most commonly seen in auto insurance policies, particularly in situations where physical damage to a vehicle occurs, such as theft or accidents. In the case of theft of the entire vehicle, the deductible would typically apply because the insurance company will only cover the value of the loss minus the deductible amount. The policyholder must pay the deductible before receiving any payout for the stolen vehicle. Other situations, like fire damage or lightning damage, may also involve deductibles, but they are often associated with different types of property or homeowner's insurance policies rather than auto insurance. Accident benefits, on the other hand, cover medical expenses and similar needs, and typically do not involve deductibles in the same manner as theft claims do. Therefore, the application of a deductible is most commonly associated with situations like the theft of a vehicle, making this answer accurate.