Tennessee Insurance Practice Exam

In health insurance, what function does the deductible serve?

1. To calculate premiums

2. To determine the coverage limits

3. To share costs between the insurer and the insured

4. To set aside funds for future claims

The correct answer is: To share costs between the insurer and the insured

In health insurance, the deductible serves the essential function of sharing costs between the insurer and the insured. A deductible is the amount of money that the insured must pay out-of-pocket for healthcare services before the insurance company begins to pay its share of the costs. This mechanism incentivizes insured individuals to be more mindful of their healthcare expenses, as they assume responsibility for initial costs up to the deductible amount. Once this threshold is met, the insurer will contribute to further costs according to the terms of the policy, such as covering a percentage of medical expenses or providing coverage for specific services. This cost-sharing aspect helps manage healthcare expenditure for both the insured and the insurer, promoting a balance between access to care and financial responsibility. The other options pertain to different aspects of health insurance or do not reflect the purpose of a deductible accurately. For instance, while premiums are related to the cost of insurance and coverage limits define the maximum benefits available, these factors do not directly involve the function of the deductible itself. Moreover, the idea of setting aside funds for future claims does not align with how deductibles operate within the structure of policy agreements.