Arizona Health Insurance Practice Exam

What is an example of a rebate in the context of insurance?

1. Offering a cash discount on premiums

2. Splitting the commission with the buyer on a sale for insurance

3. Providing free additional coverage

4. Reducing the deductible for high-risk clients

The correct answer is: Splitting the commission with the buyer on a sale for insurance

The correct answer relates to the concept of a rebate in insurance, which typically involves returning a portion of the premium or commissions back to the insured. When insurance agents or brokers offer to split their commission with the buyer, they are essentially providing a financial benefit that fits the definition of a rebate. This practice can often make insurance more affordable for the client while still adhering to regulatory guidelines concerning rebates. Other options do not accurately reflect the standard definition of a rebate in the insurance industry. Offering a cash discount on premiums involves lowering the cost at the outset rather than sharing the commission afterward. Providing free additional coverage does not equate to a rebate since it doesn’t involve returning any funds to the policyholder. Similarly, reducing the deductible for high-risk clients is more of a risk management strategy than a rebate, as it entails adjustments to the policy terms rather than a return of premium.