Final answer:
The Family Protection Endorsement extends insurance coverage for family members when involved in an accident with a motorist carrying minimal insurance, allowing them to receive benefits similar to their own policy’s coverage. It also includes protection for medical expenses and in the event of a policyholder's death. Cost-sharing measures like deductibles and copayments are in place to reduce moral hazard by ensuring policyholders share in the financial responsibility.
Step-by-step explanation:
The Family Protection Endorsement is an addition to an auto insurance policy that provides coverage for the policyholder and family members. This particular endorsement option primarily offers added protection in the event the insured or a family member is involved in an accident with a negligent motorist who has minimal coverage limits. It ensures that the insured and their family members are afforded the same level of protection as if the at-fault party had sufficient insurance coverage, similar to the policyholder’s own limits.It's important to note that endorsements can customize insurance policies to fit individual needs, and the Family Protection Endorsement is no exception. For example, if medical expenses are incurred, or the policyholder dies as a result of a car accident, the Family Protection Endorsement can provide financial coverage. The same holds true for accidents resulting in damage to the family's dwelling or automobile.Furthermore, reducing moral hazard in insurance policies often includes cost-sharing strategies such as deductibles, copayments, and coinsurance. These methods ensure that the policyholder bears part of the cost, promoting a sense of responsibility and discouraging negligence. For instance, with auto insurance, the policyholder might be responsible for the first $500 of any loss, while health insurance might require a copayment for doctor visits, with the insurance covering the rest.