North Carolina Adjuster Practice Exam

The term "deductible" specifically refers to the amount that the insured must pay out of their own pocket before the insurance company will cover the remaining costs for a claim. This mechanism is designed to share the risk between the insurer and the insured, as it requires the insured to take on a portion of the financial burden in the event of a loss.

For instance, if a policy has a $1,000 deductible, and the insured suffers a loss that costs $5,000 to repair, the insured would first need to pay $1,000, and then the insurer would cover the remaining $4,000. This concept helps to prevent small claims being filed and encourages policyholders to manage their risk.

The other options refer to different aspects of an insurance policy. The total amount that the insurer pays for a covered loss pertains to the claim settlement rather than the deductible. The maximum limit of liability refers to the highest amount the insurer will pay for a covered loss, which sets a cap on the benefit rather than outlining the insured’s financial responsibility. The annual fee paid to maintain the policy is known as the premium, which is distinct from the deductible. Each of these elements plays a different role in the insurance process, but the deductible's