Hawaii Insurance License Practice Exam

Question: 1 / 400

What is the primary purpose of a deductible in an insurance policy?

To increase coverage limits

To eliminate small claims

The primary purpose of a deductible in an insurance policy is to eliminate small claims. When a policyholder agrees to a deductible, they accept that they will pay a specific amount out-of-pocket before the insurance coverage kicks in. This mechanism discourages the submission of minor claims, which can be costly for insurance companies to process. By having a deductible, policyholders are less likely to file claims for small losses, hence streamlining administrative processes and keeping premiums more manageable for everyone in the insurance pool.

In essence, deductibles help maintain the efficiency of the insurance system by filtering out claims that are too minor to warrant the administrative costs involved in processing them. This helps ensure that insurance can remain affordable and accessible for larger, more significant claims, ultimately benefiting the policyholders who require substantial coverage.

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To ensure policy compliance

To reduce insurance premiums

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