Automobile insurance policies include deductibles:
A) to minimize moral hazard.
B) because,when it comes to health,most people are risk-averse.
C) to minimize adverse selection.
D) because many health insurance companies own hospitals.

Question

Quizplus · Accepted Answer

Deductibles are used in automobile insurance policies to minimize moral hazard. This means that the policyholder is less likely to take risks that could result in an accident or damage to the car since they will have to pay a certain amount out of pocket before the insurance company covers the rest. This helps to reduce the overall cost of insurance premiums.

Automobile Insurance Policies Include Deductibles