Hawaii Insurance Adjuster License Practice Exam

The deductible under a homeowner policy does not apply to which of the following?

1. Property Damage

2. Personal Liability Coverage

3. Medical Payments Coverage

4. Liability Coverage

The correct answer is: Liability Coverage

In a homeowner policy, the deductible is primarily associated with property-related claims. When a property loss occurs, the policyholder typically pays a certain amount out-of-pocket, known as the deductible, before the insurance company pays the remainder of the claim. This is common for claims related to property damage, reflecting the insured’s responsibility for a portion of the loss. However, in the context of liability coverage, including personal liability and medical payments coverage, the deductible is not applied. Liability coverage is designed to protect the policyholder from legal responsibility for damages they may inflict on others, such as in cases of bodily injury or property damage to third parties. Since the purpose of liability insurance is to provide financial protection against claims made by others, it generally does not include a deductible; the insurance covers the entirety of the awarded amount up to the policy limits. Medical payments coverage operates similarly in that it is intended to cover medical expenses for injuries sustained by others on the insured property, regardless of fault. This coverage is designed to provide swift assistance without making the injured party go through a lengthy claims process, thus reinforcing the idea that no deductible applies. Understanding these distinctions is key in recognizing how homeowner policies are structured regarding deductibles and the nature of coverage provided.