What does a deductible signify in an insurance policy?

A deductible in an insurance policy signifies an amount that the policyholder must pay out of pocket before the insurance company begins to compensate for a covered loss. This is a common feature in various types of insurance, including health, auto, and homeowners insurance. For example, if a policy has a deductible of $1,000, the insurance company will only start paying for claims once the policyholder has incurred expenses that exceed that amount. This mechanism helps to reduce the number of small claims made to insurers, which can help keep overall premiums lower.

The other options address different components of insurance but do not accurately define what a deductible is. The total claim limit concerns the maximum payout allowed under the policy, while a guarantee of payment suggests that claims will be paid regardless of circumstances, which does not accurately reflect how deductibles function. The maximum benefit for indirect losses pertains to limits on specific types of damage, which is again unrelated to the concept of a deductible.