Life & Health Insurance Practice Exam 2026 - Free Practice Questions and Study Guide

A Flat Deductible in insurance plans serves the specific function of indicating the amount of healthcare expenses that the insured must pay out-of-pocket before the insurance company begins to cover costs. Essentially, this means that once the insured has incurred expenses that exceed the flat deductible amount, the insurance plan will start to pay for covered services.

This structure helps manage costs for the insurance provider, as it ensures that the insured retains some financial responsibility for their medical expenses. By having a flat deductible, the plan encourages individuals to be more conscious of their healthcare spending while still offering protection against high costs after the deductible is met.

The other options do not accurately describe the purpose of a Flat Deductible. For instance, it does not inherently lead to higher maximum payouts or cover alternative therapies, nor is it specifically designed to lower premiums for high-risk patients. Instead, it sets a clear threshold for cost-sharing between the insurer and the insured, making it an important concept in understanding insurance policy structures.