In an insurance policy, what is a "deductible"?

A "deductible" refers to the amount an insured individual must pay out-of-pocket for covered expenses before the insurance company begins to pay for the remaining costs. This concept is integral to many insurance policies, as it helps to share the risk between the insurer and the insured. When a claim is made, the insurer subtracts the deductible from the total amount before providing coverage for the remaining expenses, thereby reducing the insurer's risk and lowering the overall cost of the policy for the insured.

Choosing this option indicates a proper understanding of how deductibles function within the insurance model, promoting responsible usage of insurance by ensuring that policyholders are financially invested in their claims. Knowing the deductible amount in advance can also help policyholders in budgeting for expenses related to potential damages or losses.