State Farm Auto Insurance Practice Test

What is a deductible in auto insurance?

1. A specific amount you must pay before the insurance coverage kicks in

2. The total amount paid by your insurance for a claim

3. The monthly premium for your auto insurance policy

4. An additional fee for filing a claim

The correct answer is: A specific amount you must pay before the insurance coverage kicks in

A deductible in auto insurance refers to the specific amount that you must pay out of pocket before your insurance policy begins to cover the remaining costs of a covered claim. This means that if you file a claim, you will first need to pay this predetermined amount, and then your insurance company will take over for the expenses that exceed the deductible limit. For instance, if you have a deductible of $500 and you incur $2,000 in damages, you will pay the initial $500, and your insurer will cover the remaining $1,500. The purpose of a deductible is to reduce the frequency of small claims made by policyholders and to share the financial responsibility between the insurer and the insured. The other options refer to concepts that differ from the definition of a deductible. The total amount paid by your insurance for a claim is not the deductible but rather the benefit amount that exceeds what you have paid out of pocket. The monthly premium is the cost of maintaining the insurance policy, not related to individual claims. An additional fee for filing a claim does not typically represent how auto insurance deductibles function, as filing a claim usually does not involve an extra fee apart from the deductible itself.