Question

A statement that the insured will not receive more than $100,000 in benefits in any one calendar year is known as:

a) Benefit cap provision
b) Annual limit clause
c) Maximum payout declaration
d) Policy benefit threshold

Answer 1

A statement that limits benefits to $100,000 in a calendar year is known as an 'Annual limit clause'. It is one of several strategies, like deductibles and copayments, used by insurance policies to reduce moral hazard and ensure policyholders share in the cost burden.

Step-by-step explanation:

A statement that the insured will not receive more than $100,000 in benefits in any one calendar year is known as b) Annual limit clause. This is an insurance term that refers to the cap on the amount of benefits that an insurance policy will pay out to the policyholder within a single year. Insurance policies deploy various mechanisms such as deductibles, copayments, and coinsurance to reduce moral hazard, which is the risk that the insured party may not take reasonable care to avoid or minimize losses because they are protected against the loss. These provisions ensure that the insured also bears some portion of the costs, thereby promoting more responsible use of insurance coverage.