Which term describes the maximum amount deducted from a loss before an indemnity is paid?

Prepare for the Missouri Crop Insurance Test. Enhance your knowledge with flashcards and multiple choice questions, providing hints and detailed explanations. Ace your exam with confidence!

The term that describes the maximum amount deducted from a loss before an indemnity is paid is "deductible." In the context of crop insurance, a deductible is the portion of the loss that the insured must bear before the insurance coverage kicks in and begins to pay for the remaining loss. This means that if a farmer suffers a loss, they would pay the amount of the deductible upfront, and only losses exceeding that amount would be eligible for compensation through the insurance policy.

A deductible serves to share the risk between the insurer and the insured, encouraging the policyholder to take reasonable steps to prevent losses. It also helps to keep insurance premiums in check because higher deductibles often lead to lower premium costs.

The other terms listed refer to different aspects of insurance coverage and do not define the concept of a deductible. For example, a replanting limit refers specifically to the maximum amount the insurer will pay for replanting crops due to various causes, while excess of loss typically pertains to a specific type of insurance arrangement dealing with large claims beyond a certain point. Coverage limit indicates the maximum amount of coverage available under the policy but does not convey the idea of an initial amount subtracted from a loss, which is the essence of a deductible.

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