What type of deductible is applied when losses are covered only after a specified amount is exceeded?

The type of deductible that is applied when losses are covered only after a specified amount is exceeded is referred to as a franchise deductible. This deductible operates in a unique manner compared to traditional fixed deductibles, as it does not reduce the payout for claims that are below the specified threshold. Instead, if the loss amount exceeds the specified deductible, the insurance coverage kicks in for the entire amount of the loss, after exceeding that threshold.

For example, if a franchise deductible is set at $5,000, any loss amount below that will not be compensated, while any loss above $5,000 will be covered fully without considering the deductible further. This structure can be particularly beneficial in certain contexts, such as property coverage, as it simplifies claims for larger losses.

The other types of deductibles mentioned do not function in this way: a fixed deductible requires a set dollar amount to be subtracted from each loss incurred, a percentage deductible is calculated as a percentage of the total loss, and a coinsurance deductible typically relates to the percentage of a claim that the policyholder must pay based on the total value of the insured property. Each of these serves different purposes in insurance policies, but the franchise deductible uniquely accommodates losses above a specified amount without a continuous reduction in