What is a "deductible" in insurance terms?

A deductible is a specific amount that a policyholder is required to pay out-of-pocket before their insurance coverage begins to pay for a covered loss. This concept is key in insurance policies, as it helps to share the risk between the insurer and the insured. By having a deductible, insurers can reduce the number of small claims and keep the premiums lower for policyholders.

When an insured event occurs, the deductible represents the initial cost that the insured must cover. For instance, if a person has a $500 deductible and incurs a loss of $2,000, they will pay the first $500, and the insurance company will cover the remaining $1,500. This structure encourages insured individuals to be more mindful about how often they file claims, as they will be responsible for the deductible amount each time they do.

The other choices refer to different concepts in insurance. The total claim amount payable by the insurance company pertains to the total cost the insurer will cover after considering the deductible. The fee charged for policy issuance refers to administrative costs associated with setting up the insurance policy, which does not play a role in the deductible. Lastly, the portion of the claim that the insurer pays is essentially the amount left after the deductible has been applied, not the