A contractor's workers comp insurance has a $2,500 deductible per claim. An employee injury results in $18,000 in medical costs and $12,000 in temporary disability. What amount does the insurance company pay?
Correct Answer
A) $27,500
Total claim: $18,000 + $12,000 = $30,000. Insurance pays: $30,000 - $2,500 deductible = $27,500. The contractor pays the $2,500 deductible.
Why This Is the Correct Answer
Option A ($27,500) is correct. The total claim value is $18,000 (medical) + $12,000 (temporary disability) = $30,000. A per-claim deductible of $2,500 is applied once to the entire claim regardless of how many types of benefits are involved. The insurance company pays $30,000 − $2,500 = $27,500, with the contractor responsible for the $2,500 deductible.
Why the Other Options Are Wrong
Option B: $15,500
Option B ($15,500) is incorrect. This appears to subtract the deductible from only the medical portion ($18,000 − $2,500 = $15,500) and ignore the temporary disability benefits entirely, which is not how workers' compensation deductibles work.
Option C: $29,500
Option C ($29,500) is incorrect. This subtracts an incorrect deductible amount, perhaps applying $500 instead of $2,500 ($30,000 − $500 = $29,500). The policy clearly states a $2,500 deductible per claim.
Option D: $30,000
Option D ($30,000) is incorrect. This is the gross claim amount before applying the deductible. Selecting this answer ignores the deductible provision entirely, which is the key element being tested.
Memory Technique
Think of a workers' comp deductible like a car insurance deductible: no matter how many repair items the body shop lists (bumper, hood, paint), you only pay your deductible once per accident. Same principle — one claim, one deductible, regardless of how many benefit types are involved.
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