Which program involves the insured retaining a significant portion of losses through a high deductible?

Which program involves the insured retaining a significant portion of losses through a high deductible?

• A. Self-insurance
• B. Assigned risk/residual market
• C. Guaranteed cost
• D. Large deductible program

Answer: (D)

A large deductible program is a risk-financing arrangement where the insured retains a substantial portion of losses by agreeing to a high deductible. The insured pays losses up to the deductible amount, while the insurer covers losses above that threshold and often handles the claims. This setup lowers premium costs because the insurer is assuming less risk on smaller losses, and it gives the insured greater control over loss prevention and claims handling. It differs from self-insurance, which would typically involve bearing losses without an insurer’s coverage or contractual protections; it also isn’t the assigned risk/residual market, which serves high-risk buyers who can’t obtain coverage in the voluntary market; and it isn’t guaranteed cost, which involves a fixed premium with less loss retention by the insured.

A large deductible program is a risk-financing arrangement where the insured retains a substantial portion of losses by agreeing to a high deductible. The insured pays losses up to the deductible amount, while the insurer covers losses above that threshold and often handles the claims. This setup lowers premium costs because the insurer is assuming less risk on smaller losses, and it gives the insured greater control over loss prevention and claims handling. It differs from self-insurance, which would typically involve bearing losses without an insurer’s coverage or contractual protections; it also isn’t the assigned risk/residual market, which serves high-risk buyers who can’t obtain coverage in the voluntary market; and it isn’t guaranteed cost, which involves a fixed premium with less loss retention by the insured.