In the context of property insurance, what does "deductible" refer to?

In property insurance, the term "deductible" specifically refers to the amount the insured is responsible for paying out-of-pocket before the insurer begins to cover the remaining costs related to a covered loss. This means that if a claim is made, the policyholder must first pay the deductible amount, and only after that will the insurance company pay for the covered expenses up to the policy limits.

For example, if a homeowner has a deductible of $1,000 and suffers damage amounting to $5,000, they would need to pay the first $1,000 of the repair costs, and then the insurance would cover the remaining $4,000, assuming the claim is within the policy limits. This structure helps to share the risk between the insurer and the insured, as it discourages minor claims while providing a safety net for larger losses.

The other choices describe different aspects of an insurance contract but do not accurately define the role of a deductible. Understanding the deductible is crucial for policyholders because it impacts their potential out-of-pocket expenses in the event of a loss.