Question

On an insurance policy, it's the amount you have to "meet" before the company will make a payment

a) Premium
b) Deductible
c) Coverage
d) Indemnity

Answer 1

A deductible is the maximum amount that the insurance policyholder must pay out-of-pocket before the insurance company pays the rest of the bill. This helps to reduce moral hazard by ensuring that the insured party has some financial responsibility and is not solely relying on the insurance company to cover all costs.

Step-by-step explanation:

A deductible is the maximum amount that the insurance policyholder must pay out-of-pocket before the insurance company pays the rest of the bill.

For example, if someone has a health insurance policy with a $500 deductible, they will need to pay the first $500 of their medical expenses before the insurance coverage starts.

This helps to reduce moral hazard by ensuring that the insured party has some financial responsibility and is not solely relying on the insurance company to cover all costs.