Some insurance companies begin paying claims only after the policyholder has paid a certain amount of money called a...
1) Premium
2) Term
3) Deductible
The correct answer is 3) Deductible.
To get the answer, it helps to have a basic understanding of insurance terminology. A deductible is a specific amount of money that the policyholder must pay out of pocket before their insurance company starts paying for covered expenses. It is usually a fixed dollar amount, although it can also be a percentage of the claim amount.
Insurance policies typically include a deductible to prevent small or routine claims from being filed, which helps keep insurance premiums lower. Once the deductible is met, the insurance company will then begin paying for covered claims.
In this case, the question asks which term refers to the certain amount of money that the policyholder needs to pay before the insurance company starts paying claims. The term "premium" (option 1) refers to the amount of money paid by the policyholder to the insurance company regularly (usually monthly or annually) to maintain the insurance coverage. The term "term" (option 2) usually refers to the duration or length of an insurance policy, such as a term life insurance policy that covers a specific period of time.
Therefore, the correct answer is 3) Deductible.