Question

Johann maintains a $75,000 insurance policy on his boat. He pays $50 per month in premiums and his deductible is $2,500. If he is involved in an accident that does $2,000 worth of damage to the boat, how much will he have to pay?

Answer 1

If he is involved in an accident that does $2,000 worth of damage to the boat, he will have to pay the full $2,000, since his deductible is $2,500, meaning that his insurance company only starts to pay for damage after it exceeds $2,500. 

Answer 2

The correct answer is:

$2,000.

Explanation:

A deductible is an amount that an insurance company requires you to pay before they begin paying on any charges.

Since Johann's deductible is $2,500, this means he is required to pay $2,500 before his insurance will pay anything.

Since the damages are $2,000, which is less than $2,500, he will have to pay the full $2,000.