Final answer:
Liability coverage in a personal auto policy includes bodily injury and property damage coverage. To reduce moral hazard, insurance policies may include deductibles, copayments, and coinsurance, which are cost-sharing mechanisms.
Step-by-step explanation:
The liability coverage of a personal auto policy includes both bodily injury and property damage coverage. These are essential parts of an auto insurance policy to protect the insured from financial losses in the event that they are responsible for an accident that injures another person or damages someone else's property.
To reduce moral hazard, insurance policies may implement measures such as deductibles, copayments, and coinsurance. A deductible is the amount the policyholder pays before the insurance starts paying; a copayment is a fixed amount paid for a covered service; coinsurance is a percentage of costs shared between the insurer and the insured.