What is the definition of a deductible in an insurance policy?

A deductible is defined as the amount a policyholder must pay out of pocket before their insurance policy kicks in and begins to cover any remaining costs associated with a covered loss. This means that if a claim is made, the insured must first cover the predetermined deductible amount before the insurer will contribute to the expenses.

This structure is often in place to prevent policyholders from filing small or trivial claims, which helps keep overall insurance costs down. The higher the deductible, the lower the insurance premium typically is, as the policyholder assumes more risk by agreeing to pay more out of pocket in the event of a claim.