Final answer:
In insurance, indemnity is the principle by which a policyholder is compensated for actual losses without profit. Insurance policies implement deductibles, copayments, and coinsurance to share costs and mitigate moral hazard.
Step-by-step explanation:
In insurance, the principle of making someone whole after a loss by paying only for the actual losses incurred is called indemnity. This principle ensures that the insured party does not profit from the insurance policy but is instead compensated for the amount of loss. Insurance policies include various methods to share costs and reduce moral hazard, such as deductibles, copayments, and coinsurance. Deductibles require the policyholder to pay a specific amount before the insurer begins to cover the loss.
Copayments are fixed fees paid by the policyholder for certain services, and coinsurance is a clause where the insurer covers a certain percentage, and the insured pays the remainder of the costs.