In the automobile insurance industry, deductibles are meant to decrease the moral hazard associated with a claim.

True

False

Expert Solution

The answer is True

The amount of money subtracted from the price of a loss that is not covered by insurance is a deduction. Of example, if you're in a car accident and you're having a $10,000 crash injury and have a $500 collision limit, the insurance company will pay you $9,500 for your damages. If the damage caused by the crash is $450, you will not earn anything because it is less than the deductible.

The deductibles ' motives are to minimize small claims, which helps to maintain stable insurance, and to mitigate social and legal risk. Coinsurance is another way of keeping premiums low by making the insured pay part of the cost.

Rahul Sunny answered 2 years ago

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