practice exam 2 - qs 19

AyeshaAyesha
in Practice Exam 2

answer to part c says:

"Franchise deductible will eliminate more small values nuisance claims than the straight deductible"

can you please explain why this is true?

Comments

  • adminadmin

    A franchise deductible and a straight deductible will eliminate the same small value claims if the deductibles are the same size. However, here the franchise deductible is $1,500 while the straight deductible is $500.

    Assuming that say claims under $2,000 are considered small/nuisance claims then the franchise deductible will eliminate more of them. If only claims under $500 are considered small/nuisance claims then the two deductibles eliminate the same amount of these claims.

    The intent here was to get you to think about the effect of the difference in size of these deductibles.

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