Question

Which of the following describes an insurer's responsibility for payment under a policy, as stated in the common policy?

A) Coverage Limit
B) Deductible
C) Exclusion
D) Indemnification

Answer 1

Indemnification is the term that describes an insurer's obligation to pay for covered losses under a policy. Deductibles, copayments, and coinsurance are cost-sharing mechanisms that contribute to the insured bearing some cost, helping to reduce moral hazard.

Step-by-step explanation:

The term that describes an insurer's responsibility for payment under a policy is indemnification. This is the process by which the insurer provides financial compensation to the insured party for a covered loss, in accordance with the terms of the insurance policy. While the coverage limit specifies the maximum amount that the insurance company will pay for a claim, the deductible is the out-of-pocket expense that the insured must pay before the insurer's payment kicks in. Exclusions are specific conditions or circumstances for which the policy does not provide coverage. Deductibles, along with copayments and coinsurance, are cost-sharing mechanisms that reduce moral hazard by ensuring that the policyholder bears some portion of the loss.