When is payment of the deductible of the E&O insurance required?

• A. On loss settlement only
• B. At policy renewal
• C. Immediately upon policy issue
• D. When a claim is denied

Answer: (A)

The amount you must pay as a deductible is handled when a covered loss is settled. The deductible is the portion of a claim that the insured is responsible for, and it comes into play only when a claim is paid or a loss is settled by the insurer. It isn’t due at the start of the policy, at renewal, or simply because a claim is denied.

For example, if a claim is settled for $50,000 and the deductible is $5,000, the insured would pay $5,000 and the insurer would cover the remaining $45,000 (up to the policy limits). If the claim is denied, there’s no payout, so no deductible is paid.