What is a deductible in insurance terms?

In insurance terminology, a deductible refers to the amount of loss that is the responsibility of the policyholder before the insurance coverage kicks in. When a claim is made, the insured must pay this predetermined amount out-of-pocket. Only after this deductible has been met will the insurance company cover the remaining costs of the claim, up to the policy limits.

Understanding this concept is essential as it directly affects how much the insured will receive when a claim is filed, and influences decisions regarding policy selection, coverage limits, and overall insurance costs. Having a higher deductible usually means lower premiums, but it also means that the insured will bear more of the initial financial burden in the event of a loss.