What is the primary purpose of insurance deductibles?

The primary purpose of insurance deductibles is to establish cost-sharing between the insured individual and the insurance company. A deductible is the amount of money that the insured must pay out-of-pocket before the insurance coverage kicks in. This mechanism serves multiple functions, including encouraging responsible use of medical services and ensuring that individuals contribute to the cost of their healthcare, which can deter unnecessary claims and promote cost-conscious behavior.

When individuals have a deductible, they are more likely to consider the costs associated with their care, as they will be responsible for that initial expense. As a result, this structure is intended to balance the risk between the insurance provider and the insured, fostering a system where both parties share in the cost of healthcare.

The other options do hold some truth but do not capture the primary role of deductibles as clearly. For instance, while deductibles can help reduce the overall cost of premiums by lowering the insurer's risk exposure, the main focus of a deductible is on the shared financial responsibility.