In insurance terminology, what does the term "deductible" refer to?

In insurance terminology, "deductible" refers specifically to the sum of money that a policyholder must pay out of pocket before the insurance coverage begins to pay for a claim. This amount is crucial as it defines the threshold that must be met for the insurance company to start paying its share of the claim.

For example, if a policyholder has a deductible of $1,000 and files a claim for $5,000, they will be responsible for paying the first $1,000, and then the insurer will cover the remaining $4,000, assuming all other coverage requirements are met. This concept is vital in understanding how insurance policies function, including the financial responsibilities that policyholders bear when they choose their coverage options.

The other options refer to different aspects of an insurance policy, such as the insurer’s payment obligations, overall cost of the premium, or limits on the coverage provided, but they do not accurately describe the role of the deductible in this context.