What does "deductible" mean in an insurance policy?

The term "deductible" in an insurance policy refers to the amount that a policyholder must pay out of their own pocket before the insurance coverage begins to pay for any remaining costs associated with a claim. This means that if an insured event occurs, the policyholder is responsible for covering the initial portion of the expenses up to the deductible amount. Only after this amount has been met will the insurer start to contribute to the costs, as specified in the policy.

Deductibles serve multiple purposes, such as reducing the number of small claims made to insurers and encouraging policyholders to be more responsible when filing claims, knowing they will incur some associated costs. This mechanism also helps in keeping insurance premiums more affordable, as higher deductibles typically result in lower premium costs.