Registered Insurance Brokers of Ontario (RIBO) Practice Exam

Question: 1 / 475

In a residential insurance policy, what does a deductible clause indicate?

The total value of insured property

The amount the insurer pays for each claim

The amount in excess of which the insurer will pay

The correct answer is that the deductible clause indicates the amount in excess of which the insurer will pay. This means that when a loss occurs, the insured is responsible for covering the deductible amount before the insurer will contribute to the claim. The purpose of a deductible is to share the risk between the insurer and the insured, encouraging careful management of property and reducing the number of small claims.

In the context of residential insurance, a deductible can help stabilize insurance premiums over time, as it discourages policyholders from making trivial claims that might not significantly affect the overall value of the policy. By having a predetermined deductible amount, the insurer and insured both have clarity on their financial responsibilities in the event of a loss.

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The limit of coverage for specific losses

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