Dwelling Policy Practice Test

If an insured property has an accidental fire loss, what is the likely deductible applicable?

1. $500

2. $1,000

3. Zero

4. $2,500

The correct answer is: $1,000

In the context of a dwelling policy, deductibles can vary based on the specifics of the coverage selected by the policyholder. When considering an accidental fire loss, the deductible usually reflects what the insured has agreed to pay out-of-pocket before their insurance policy contributes to the loss. A $1,000 deductible is quite common in dwelling policies dealing with fire losses. This amount strikes a balance between manageable out-of-pocket costs for the insured while also limiting the insurance company's exposure to small claims. Insurance providers often encourage higher deductibles as a way to lower premiums, making a $1,000 deductible a typical choice among policyholders seeking a reasonable compromise between premium costs and claims payment efficiency. The other choices, while possible, typically would not be the standard deductible associated with accidental fire losses in a dwelling policy. A $500 deductible represents a lower out-of-pocket cost but is less common than $1,000 for fire losses. A zero deductible would usually be found in specific high-value policies or particular endorsements but is more rare. Lastly, a $2,500 deductible may be applicable to higher-risk properties or those owned by individuals willing to take on more risk for a lower premium but is not typically seen as the standard deductible for accidental fire losses in average dwelling