Spring 2016 Q8
it is mentioned that a min of 10% deductible is required under "regulation - key elements of Canadian Agri-Insurance Regulation". Why this question does not consider deductible when calculating indemnity paid?
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it is mentioned that a min of 10% deductible is required under "regulation - key elements of Canadian Agri-Insurance Regulation". Why this question does not consider deductible when calculating indemnity paid?
Comments
The coverage level in this question is 70%.
The expected yield for the entire crop = area probable yield per unit of area = 100584 = 58,400
The production guarantee is only 70% of this so we only get paid out if actual production falls below 0.7*58400 = 40880
The 17520 difference between expected production and production guarantee is effectively the deductible.
For yield based plans the deductible is 1- coverage level which in this case is 30%. The insured retains the first 30% of losses.
thank you. So it referring to coverage level <90%. I thought it was an additional deductible out of indemnity paid.