What does the term deductible signify in an insurance policy?

The term deductible in an insurance policy refers to the amount for which the client is responsible before the insurer begins to pay for covered losses. This means that if a claim is made, the insured must pay the deductible amount out of pocket, and only after this amount has been satisfied will the insurance coverage kick in to cover the remaining eligible expenses.

This mechanism is often used to reduce the incidence of small claims and to keep insurance premiums lower, as clients have a vested interest in a portion of the risk. Understanding this concept is critical, as it affects how policyholders approach claims and manage their insurance costs.