Which of the following is a disadvantage commonly associated with a large deductible plan?

• A. Cash management issues
• B. Insured bears no portion of risk
• C. Long-term exposure to future liabilities
• D. No collateral is ever required

Answer: (A)

Shifting to a large deductible plan puts more of the cost of claims on the insured, so the main drawback is how it affects cash flow. You have to fund the deductible amount out of pocket and potentially cover reserves for claims until losses occur, which means you need to manage and predict sizable cash outlays. This can be challenging, especially for smaller organizations or during years with many or expensive claims.

In contrast, the other ideas don’t capture that core issue as clearly. In a large deductible setup the insured does bear a portion of the risk (contrary to the idea that no risk is borne). Long-term exposure to future liabilities isn’t the primary, defining drawback because once the deductible is met, the insurer handles subsequent costs (often with stop-loss protection). And whether collateral is required depends on the specific contract and isn’t a universal feature of all large deductible plans.