CII Certificate in Insurance - Packaged Commercial Insurances (IF8) Practice Test

Choosing a higher excess in an insurance policy has the implication of requiring the policyholder to cover more of the initial costs before the insurer steps in to cover the remainder. This means that, in the event of a claim, the policyholder will incur higher out-of-pocket expenses at the time the claim is made. For example, if a policyholder experiences damage that costs $1,500 to repair and they have a higher excess of $1,000, they will need to pay the first $1,000 out of their own pocket, and the insurer will only cover the remaining $500.

The other options do not accurately reflect the effects of a higher excess. Increased premium costs would typically occur with a lower excess, as the insurer takes on more risk. Limited coverage options are not a direct consequence of having a higher excess; rather, these may be influenced by the type of policy or provider. Lastly, having a higher excess does not lead to claims being denied; instead, it affects the amount the policyholder pays upfront when making a claim. Thus, the correct understanding is that a higher excess directly correlates with greater financial responsibility for the policyholder at the time of a claim.