California Life and Health Insurance Practice Exam 2025 – Complete Test Prep

The purpose of a deductible in health insurance is fundamentally about the amount that the insured must pay out-of-pocket for healthcare services before the insurance company begins to pay its share. By having a deductible, the insurance policy establishes a threshold that must be met by the policyholder before they can benefit from the financial support of their insurer.

This mechanism not only helps manage costs for the insurance company but also encourages policyholders to be more mindful about their healthcare spending. As a result, individuals may think twice before seeking non-essential medical care, leading to a more efficient use of medical services. If the costs of healthcare were fully covered without a deductible, it could lead to overutilization of services, driving up overall healthcare expenses.

While deductibles do contribute to determining how much an insurer will cover after the insured has paid a certain amount, this is not their primary purpose. They do not limit the maximum payout for a claim or set coverage limits in terms of maximum benefits; rather, those aspects are defined by other components of the policy. Thus, the primary function of a deductible is to create a shared financial responsibility between the insurer and the insured, which is reflected in the correct answer.