Illinois Health Insurance Practice Exam

What is the term for an initial amount of loss which the insured must pay before the insurance company will begin to indemnify?

1. Maternity leave

2. Physicians expense benefits

3. Deductible

4. Coinsurance

The correct answer is: Deductible

The term that describes the initial amount of loss that the insured must pay before the insurance company will provide indemnification is known as a deductible. In insurance policies, the deductible is a specified dollar amount or percentage of covered expenses that must be paid by the insured before the insurer starts to contribute to the payment of claims. This mechanism is designed to reduce the number of small claims and to promote responsible use of insurance coverage. In contrast, maternity leave refers to the time an employee takes off work for childbirth and related care, which is not relevant to insurance claims. Physicians expense benefits typically refer to direct payments made by insurance for medical services rendered, rather than pertaining to the insured's initial financial responsibility. Coinsurance is a different concept; it refers to the shared expenses between the insurer and the insured after the deductible has been met, rather than the initial out-of-pocket amount the insured must pay. The concept of a deductible plays a pivotal role in risk management and cost-sharing in insurance policies.