Final answer:
The deductible is indeed the amount you must pay before insurance coverage kicks in. Additionally, copayments and coinsurance are cost-sharing mechanisms that require the insured to bear a portion of the costs, helping to reduce moral hazard and ensure responsible usage of insurance policies.
Step-by-step explanation:
The statement is true; the deductible is the amount of damage or expense that the policyholder is responsible for paying out-of-pocket before any coverage is provided by the insurance company. Insurance policies such as auto, health, and home insurance often include a deductible to help reduce the moral hazard, promoting responsible use of insurance benefits. Once the deductible is paid, the insurance company will cover the remaining expenses, up to the policy's coverage limits.
Beyond deductibles, there are other similar mechanisms like copayments and coinsurance designed to share the cost between the insurer and the insured. For example, under a health insurance plan, a policyholder might be required to pay a flat fee (copayment) for each doctor's visit. With coinsurance, the policyholder pays a percentage of the costs, while the insurance company pays the rest, which is determined by the specific terms of the insurance policy.