A deductible is an amount that policyholders must pay before insurance coverage begins, aimed at reducing moral hazard.
Deductible in insurance refers to the amount that policyholders must pay out-of-pocket before the coverage kicks in.
For example, if someone has a [tex]$500 deductible on their health insurance, they must pay $[/tex]500 before the insurance starts covering medical expenses.
This concept is designed to reduce moral hazard by making the insured party responsible for a portion of the costs.
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