Other Than Life (OTL) Practice Exam

Which of the following is a common feature of insurance policies?

1. Fixed annual benefits

2. Unlimited price coverage

3. Deductibles

4. Instant payouts

The correct answer is: Deductibles

The presence of deductibles in insurance policies is a standard feature designed to share risk between the insurer and the insured. A deductible is the amount that the policyholder must pay out of pocket before the insurance coverage kicks in. This mechanism helps to lower premiums because it reduces the insurer's risk, as the insured assumes some financial responsibility for losses. Deductibles also encourage policyholders to avoid making small claims, which can help keep overall costs down for the insurance company. By having a deductible, the insured has a vested interest in the value of the claims process and may take greater care in preventing losses. The other options do not typically align with common insurance policy features. For instance, fixed annual benefits are not universally applicable as policy benefits can vary considerably depending on the type of insurance and specific circumstances. Unlimited price coverage generally does not exist because policies usually have caps on covered amounts to protect insurers from excessive claims. Instant payouts are not standard, as claims processing often involves verification and assessment of the insured event, which naturally takes time.