Property and Casualty Insurance Basics Practice Test

A higher deductible means that the insured has chosen to pay more out-of-pocket before the insurance company begins to cover the remaining costs of a claim. This choice typically results in lower premium payments, as the insured is taking on more risk.

When an insured opts for a higher deductible, they are signaling their willingness to absorb a larger portion of any potential loss. In the event of a claim, the insured is responsible for the amount of the deductible, meaning they must pay that amount themselves before the insurer covers the rest. As such, their financial responsibility increases because they will need to cover more expenses upfront in the event of a loss.

This option reflects a fundamental concept in property and casualty insurance: a balance between premium costs and out-of-pocket expenses.