A Tennessee contractor's workers compensation policy has a $500 deductible per claim. An employee injury results in medical costs of $15,000 and lost wages of $8,000. How much will the contractor pay out of pocket?
Correct Answer
B) $500
The contractor pays only the $500 deductible; workers compensation covers the remaining medical costs and wages.
Why This Is the Correct Answer
The deductible is a fixed per-claim amount the policyholder pays before the insurer covers the rest. Regardless of how large the total claim is ($23,000 here), the contractor only owes the $500 deductible; the insurer pays the remaining $22,500.
Why the Other Options Are Wrong
Option A: $8,000
$8,000 is the lost wages portion of the claim. A deductible does not equal the lost-wages component; it is a separate, fixed threshold defined in the policy.
Option C: $1,000
$1,000 has no basis in the problem. Nothing doubles the $500 deductible, and the policy does not split the deductible across medical and wage components.
Option D: $2,300
$2,300 appears to be roughly 10% of the total claim ($23,000). A deductible is not a percentage of the claim — it is a flat dollar amount per occurrence.
Memory Technique
Think of a deductible as a 'door fee' — you pay it once to get in, and then the insurer covers the party. The size of the party (total claim) does not change the door fee.
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