Mary has a homeowner's policy with Coverage A at $250,000 and Coverage B at $125,000. If her policy has a 2% deductible, what is her deductible?

Mary has a homeowner's policy with Coverage A at $250,000 and Coverage B at $125,000. If her policy has a 2% deductible, what is her deductible?

• A. $2,500
• B. $5,000
• C. $3,500
• D. $4,500

Answer: (B)

To determine the deductible for Mary’s homeowner's policy, it's important to understand how it is calculated in relation to the Coverage A limit. The deductible is typically based on the amount of Coverage A, which applies to the dwelling itself. In this scenario, Mary has a Coverage A amount of $250,000. Her policy specifies a deductible of 2%. To find the deductible amount, you calculate 2% of the Coverage A limit: 1. Convert the percentage to a decimal: 2% = 0.02. 2. Multiply the Coverage A amount by this decimal: $250,000 x 0.02 = $5,000. This means that in the event of a claim, Mary would need to pay $5,000 out-of-pocket before her insurance coverage kicks in. Therefore, the deductible of $5,000 reflects the correct calculation based on the 2% of the Coverage A limit. Understanding how deductibles work in relation to coverage limits is vital for properly assessing potential out-of-pocket costs when filing an insurance claim.

To determine the deductible for Mary’s homeowner's policy, it's important to understand how it is calculated in relation to the Coverage A limit. The deductible is typically based on the amount of Coverage A, which applies to the dwelling itself.

In this scenario, Mary has a Coverage A amount of $250,000. Her policy specifies a deductible of 2%. To find the deductible amount, you calculate 2% of the Coverage A limit:

1. Convert the percentage to a decimal: 2% = 0.02.

2. Multiply the Coverage A amount by this decimal: $250,000 x 0.02 = $5,000.

This means that in the event of a claim, Mary would need to pay $5,000 out-of-pocket before her insurance coverage kicks in.

Therefore, the deductible of $5,000 reflects the correct calculation based on the 2% of the Coverage A limit. Understanding how deductibles work in relation to coverage limits is vital for properly assessing potential out-of-pocket costs when filing an insurance claim.