Nebraska Property and Casualty Practice Test

Question: 1 / 400

What might be a consequence of having a higher deductible?

Higher premiums but lower out-of-pocket costs

Lower premiums but higher out-of-pocket costs when a claim is made

Choosing a higher deductible on an insurance policy typically leads to lower premiums. This is because the policyholder assumes more risk by agreeing to pay a greater amount out-of-pocket before the insurance coverage kicks in. In the event of a claim, this means that while the policyholder will pay less in monthly premiums, they will face higher out-of-pocket costs due to the higher deductible.

This trade-off is common in insurance policies, particularly in auto and health insurance. While lower premiums may make coverage more financially manageable on a monthly basis, the higher deductible means that when an accident or health issue arises, the insured party will need to cover a larger portion of the costs initially. This can be a significant consideration when selecting an insurance plan, as it impacts both budget planning and the financial consequences of filing a claim.

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