might offer a business a lower rate on property insurance if the business installs a top-level security and fire

sprinkler system and has those systems inspected once a year.

Another method to reduce moral hazard is to require the injured party to pay a share of the costs. For example,

insurance policies often have deductibles, which is an amount that the insurance policyholder must pay out of

their own pocket before the insurance coverage starts paying. For example, auto insurance might pay for all

losses greater than $500. Health insurance policies often have a copayment, in which the policyholder must

pay a small amount. For example, a person might have to pay $20 for each doctor visit, and the insurance

company would cover the rest. Another method of cost sharing is coinsurance, which means that the

insurance company covers a certain percentage of the cost. For example, insurance might pay for 80% of the
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