Final answer:
A deductible is the amount the insured must pay before insurance benefits begin, which is a part of the cost-sharing mechanisms like copayments and coinsurance. The correct answer is option b).
Step-by-step explanation:
An amount the insured must pay before policy benefits begin is called a deductible. Insurance policies, such as health, auto, and home insurance often include a deductible. This is the maximum amount that the policyholder is required to pay out-of-pocket before the insurance company begins to cover the costs.
Once the deductible is paid, the policy may also involve copayments (a flat fee for a specific service or visit) or coinsurance (a percentage of the total cost that the policyholder pays), which further defines the cost-sharing responsibilities between the insured and the insurer.
These measures are designed to reduce moral hazard by ensuring that the insured party assumes a portion of the risk and thereby potentially discouraging reckless behavior and excessive claims.