Final answer:
Many insurance policies have deductibles, copayments, and coinsurance. These reduce moral hazard by requiring the insured party to bear some of the costs before collecting insurance benefits.
Step-by-step explanation:
Many insurance policies have deductibles, copayments, or coinsurance. A deductible is the maximum amount that the policyholder must pay out-of-pocket before the insurance company pays the rest of the bill. A copayment is a flat fee that an insurance policyholder must pay before receiving services. Coinsurance requires the policyholder to pay a certain percentage of costs. Deductibles, copayments, and coinsurance reduce moral hazard by requiring the insured party to bear some of the costs before collecting insurance benefits.
An amount of money a policyholder must pay before an insurance company will pay anything is deductible. This statement is true. Deductibles are set amounts that policyholders must pay out-of-pocket for covered expenses before the insurance policy's coverage begins to pay. For instance, if you have a deductible of $500 on your auto insurance policy, you would need to pay for the first $500 of damages in an accident before the insurer covers any of the remaining costs. Similarly, in health insurance, a copayment is an additional fee that an insured person pays for specific medical services, such as $20 for a doctor's visit. Meanwhile, coinsurance is a cost-sharing arrangement where the policyholder pays a certain percentage of the total costs, like 20% of the bill for medical procedures, with the insurance company covering the rest.