Question

An amount the insured must pay before policy benefits begin is called_?

1) Indemnity
2) Extended benefits
3) Deductible
4) Catastrophic

Answer 1

An amount the insured must pay before policy benefits begin is called a deductible. Deductibles, copayments, and coinsurance reduce moral hazard by requiring the insured party to bear some of the costs before collecting insurance benefits.

Step-by-step explanation:

An amount the insured must pay before policy benefits begin is called a deductible. A deductible is the maximum amount that the policyholder must pay out-of-pocket before the insurance company pays the rest of the bill. For example, auto insurance might pay for all losses greater than $500. Health insurance policies often have a copayment, in which the policyholder must pay a small amount. Another method of cost sharing is coinsurance, which means that the insurance company covers a certain percentage of the cost. Deductibles, copayments, and coinsurance reduce moral hazard by requiring the insured party to bear some of the costs before collecting insurance benefits.