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In the context of insurance, the term liability is used to mean that you may be required to pay someone for damages that you caused. True or False

User Shamy
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Final answer:

True, liability in insurance refers to the obligation to pay for damages caused. Insurance policies utilize deductibles, copayments, and coinsurance to reduce moral hazard and ensure policyholders share in the cost of claims. Workman's compensation insurance is another form of risk management requiring employer contributions for injured employees.

Step-by-step explanation:

True, in the context of insurance, the term liability means that you may be required to pay someone for damages that you caused. Liability coverage is part of various types of insurance policies, such as auto insurance, which covers insured individuals should they inflict harm or property damage on others.

To mitigate moral hazard, insurance companies employ cost-sharing methods such as deductibles, copayments, and coinsurance. Deductibles are out-of-pocket expenses the policyholder pays before insurance kicks in, copayments are fixed amounts paid for services like doctor visits, and coinsurance is a percentage of costs shared between the insurer and insured.

Another measure to counteract the effects of moral hazard in the workplace is Workman's compensation insurance, where employers contribute to a fund that provides benefits to employees injured on the job, adhering to state law requirements.

User Kgreenek
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