Question

Under a General Liability Policy the duty of the insurer is to pay for damages that:

a. The insured is legally liable for.
b. Any third party who has suffered bodily injury caused by the insured.
c. Has been caused by the insured regardless of negligence.
d. To the second party who has suffered bodily injury.

Answer 1

General Liability Policies cover damages for which the insured is legally liable, often requiring some form of negligence. Moral hazards are mitigated through deductibles, copayments, and coinsurance, which involve cost-sharing by the insured. Option a.

Step-by-step explanation:

Under a General Liability Policy, the duty of the insurer is to pay for damages for which the insured is legally liable option a. This coverage applies when the insured is found to be at fault for causing bodily injury or property damage to a third party. It is essential to note that such policies typically require the insured to be negligent or at fault for the insurer to pay for the damages. Policies can cover medical expenses, property damage, and legal fees associated with defending the insured against claims.

To mitigate moral hazard, insurance policies often include mechanisms like deductibles, copayments, and coinsurance, requiring the insured to bear a portion of the risk and discouraging negligent behavior. Deductibles are amounts paid out-of-pocket before coverage kicks in; copayments are fixed fees for each service, like a doctor visit; coinsurance is a percentage of the costs paid by the policyholder.