Question

in what way does a deductible help an insurance company?
○ it adds to the companys pool of funds.
○ it increases consumers insurance premiums.
○ it lowers the payout the company has to make.
○ it reduces consumers co - payments.

Explanation:

To determine how a deductible helps an insurance company, we analyze each option:

• "It adds to the company’s pool of funds": A deductible is the amount the insured pays before the insurer pays, so it doesn't directly add to the company's fund pool. Eliminate this.
• "It increases consumers’ insurance premiums": A deductible typically has an inverse relationship with premiums (higher deductible often means lower premium), so this is incorrect. Eliminate this.
• "It lowers the payout the company has to make": A deductible is the amount the insured pays first. So, for a claim, the insurer pays only the amount exceeding the deductible, which reduces their payout. This makes sense.
• "It reduces consumers’ co - payments": A deductible and co - payment are different. A deductible doesn't reduce co - payments. Eliminate this.

Answer:

C. It lowers the payout the company has to make.