2025 Insurance Adjuster Licensing Practice Test – Complete Exam Prep

A franchise deductible is a specific type of deductible that operates by requiring the insurance policy to pay only after the loss exceeds a certain predetermined threshold. This is a key characteristic as it sets a minimum loss amount that must be incurred before the insurance coverage kicks in. In practical terms, if the loss is below this predetermined amount, no payment will be made, and if it is above, the full amount of the loss will be covered.

This structure contrasts with other types of deductibles where, for example, a fixed payment may be required from the insured regardless of the total loss amount or where only a certain percentage of the claim is covered. Additionally, a franchise deductible does not reset annually nor change based on claims history, which would be a different kind of policy structure.

Understanding the nature of a franchise deductible is important for insurance adjusters, as it influences how claims are processed and the expectations set for both the insurer and the insured regarding coverage and payouts.