How is "deductible" defined in insurance policies?

In insurance policies, a "deductible" is defined as the portion of a claim that the insured must pay before the coverage provided by the insurance policy applies. This means that when a loss occurs, the insured is responsible for covering a specific amount of that loss upfront. Once the deductible is paid, the insurance company will then cover the remaining amount of the claim, up to the limits of the policy.

The concept of a deductible serves to reduce the number of small claims filed with insurance companies and encourages policyholders to take care in managing risks and losses. By requiring the insured to bear a portion of the financial responsibility for a loss, deductibles also help to keep premiums lower since the insurer is not covering every potential claim in full.

Other options provided do not accurately capture the definition of a deductible. For instance, one option describes the insurer's payout for a loss, which pertains to the claims process after deductibles have been applied, while another option refers to the maximum amount payable under the policy, also known as the coverage limit. The mention of an annual fee relates to policy maintenance costs, known as premiums, rather than the deductible concept itself.