Final answer:
A deductible is an amount paid by an insurance policyholder before coverage kicks in. It is part of the insurance plan to reduce moral hazard. Deductibles are common in various insurance policies, including health, auto, and homeowners insurance.
Step-by-step explanation:
A deductible is a specified amount that the insurance policyholders must pay out of their own pocket before the insurance coverage pays anything. This is a standard feature in many insurance policies and serves the purpose of reducing moral hazard, ensuring that the insured party bears a portion of the costs before benefits are paid out. Deductibles can be found in various insurance policies, including health insurance, auto insurance, and homeowners insurance.
When an insured individual receives services from a medical care provider under a fee-for-service plan, the providers are paid for each service they perform. Alternatively, a health maintenance organization (HMO) provides health care to enrolled individuals for a fixed amount, regardless of the number of services provided.