Series 79 practice questionmediumRepresentations and Warranties
The agreement contains a $500,000 deductible basket and a $5 million cap. If a covered $600,000 claim is made, how much is potentially payable?
- A$0, the basket is not met
- B$5 million, the cap applies
- C$100,000, the amount exceeding the basket✓ Correct answer
- D$600,000, the full claim
Explanation
Why C — $100,000, the amount exceeding the basket
With a deductible basket, only losses above $500,000 are payable, so the amount is $100,000. With a tipping basket, the full $600,000 could become payable once the threshold is crossed; the agreement must specify the type.
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