Achieve Financial Brilliance with the 2026 CFC Exam – Crack the Code to Consulting Success!

Question: 1 / 400

What purpose do coinsurance provisions serve in an insurance policy?

To encourage policyholders to take on more risk

To provide full coverage without any cost-sharing

To help prevent over-utilization of the policy

Coinsurance provisions in an insurance policy are designed to promote responsible use of the insurance benefits. By requiring policyholders to share a portion of the costs (such as a percentage of the covered expenses), coinsurance acts as a financial incentive for them to utilize healthcare services judiciously. This cost-sharing mechanism helps discourage unnecessary claims or over-utilization of services, as policyholders will be more mindful of incurring expenses when they know they will be partially responsible for the costs.

The objective is to align the interests of the insurer and the insured, ultimately leading to a more sustainable insurance model. In essence, while policyholders maintain coverage and benefit from the insurance in case of significant expenses, they also bear some of the costs, which can lead to more prudent decisions regarding their healthcare choices.

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To lower premiums for policyholders

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