What does the term "deductible" refer to in insurance policies?

The term "deductible" in insurance policies refers to the amount the insured must pay out of pocket before the insurance coverage begins to cover the remaining costs of a claim. This means that if a policyholder files a claim, they will first need to pay the deductible amount, and only after that will the insurance company start to pay for the covered expenses.

Having a deductible helps to prevent small or frivolous claims and encourages responsible use of insurance coverage. It also reduces the overall premium costs because the insurer is assuming less risk when the policyholder takes on some of the financial responsibility in the event of a loss.

The other choices do not accurately define what a deductible is; for example, the payment the insurer makes for a claim represents the benefit the insured receives, while the premium cost relates to the amount paid for the policy itself. The total amount insured pertains to the coverage limit, which is separate from the concept of a deductible.