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

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

• A. The full payment made to the insurance provider
• B. The amount a policyholder must pay before coverage kicks in
• C. The maximum limit of coverage provided in a policy
• D. The portion of a claim that an insurer will not cover

Answer: (B)

The term "deductible" specifically refers to the amount that a policyholder must pay out of pocket before their insurance coverage begins to contribute towards the costs of a claim. This is a common feature in many types of insurance policies, including health, auto, and homeowner's insurance. By requiring a deductible, insurers help to manage claims and decrease their financial risks, as it incentivizes policyholders to share in the cost of healthcare or damages. For example, if a health insurance policy has a $1,000 deductible, the policyholder would need to pay the first $1,000 of their medical expenses before the insurance company starts paying for covered services. In contrast, the other options do not accurately describe a deductible. The full payment made to the insurance provider is more commonly known as a premium, while the maximum limit of coverage refers to the cap on what an insurance policy will pay for certain claims. The portion of a claim that an insurer will not cover may be described in terms of co-insurance or co-payments, rather than being the definition of a deductible.

The term "deductible" specifically refers to the amount that a policyholder must pay out of pocket before their insurance coverage begins to contribute towards the costs of a claim. This is a common feature in many types of insurance policies, including health, auto, and homeowner's insurance.

By requiring a deductible, insurers help to manage claims and decrease their financial risks, as it incentivizes policyholders to share in the cost of healthcare or damages. For example, if a health insurance policy has a $1,000 deductible, the policyholder would need to pay the first $1,000 of their medical expenses before the insurance company starts paying for covered services.

In contrast, the other options do not accurately describe a deductible. The full payment made to the insurance provider is more commonly known as a premium, while the maximum limit of coverage refers to the cap on what an insurance policy will pay for certain claims. The portion of a claim that an insurer will not cover may be described in terms of co-insurance or co-payments, rather than being the definition of a deductible.