State Farm Fire Independent Policy Practice Exam

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Study for the State Farm Fire Policy Exam. Master key concepts with multiple-choice questions, hints, and explanations. Ensure success with comprehensive preparation.

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Under Mike and Jennifer Reed's HO-3 policy, how much of the deductible would be absorbed by the loss?

$250
$0
$100
$120

The correct answer is: $250

In a standard Homeowners 3 (HO-3) policy, the deductible is the amount that an insured must pay out of pocket before insurance coverage kicks in. This deductible applies per occurrence, meaning that for each distinct loss, the homeowner is responsible for paying this set amount before the insurer pays the remainder of the claim. The correct answer indicates that the deductible absorbed by the loss amounts to $250. This means that when a loss occurs, the first $250 of that loss is the responsibility of Mike and Jennifer Reed. After this amount, any eligible expenses related to the loss would be covered by their insurance policy. In applying this to the broader context, understanding how deductibles work helps homeowners evaluate their insurance needs and make decisions about their coverage levels. In situations where the insured experiences a loss, it is essential for them to be aware of their deductible amount, as this impacts the total compensation they may receive from their insurer after filing a claim.