In insurance terminology, what is a 'deductible'?

A deductible is defined as the amount that is subtracted from a claim payout before the insurer disburses funds to the policyholder. When a policyholder files a claim, the deductible represents the portion of the loss that the insured agrees to pay out of pocket. For instance, if a policy has a $500 deductible and a claim for damages amounts to $2,000, the insurer will only pay $1,500, since the insured is responsible for the first $500.

This structure is designed to encourage responsible insurance usage, as it prompts policyholders to be more diligent in preventing losses, knowing they will bear some initial costs. Deductibles can be found in various types of insurance policies, including auto, homeowner's, and health insurance, and they can vary depending on the policy chosen.

In contrast, the other options pertain to different aspects of insurance and claims. They do not specifically outline the concept of a deductible, making the correct answer distinct and relevant to understanding policyholder financial responsibilities in relation to claims.