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

In the context of an insurance policy, the term "deductible" refers to the specific amount of money that the insured must pay out-of-pocket before the insurance coverage kicks in to pay for the remaining costs. This amount is set forth in the policy and varies depending on the type of insurance and the specific terms outlined by the insurer.

The purpose of a deductible is to share the risk between the insurer and the insured, effectively reducing the number of small claims that the insurance company has to process. By requiring the insured to pay a certain amount first, it encourages more responsible risk management since the insured has a financial stake in the outcome.

In this scenario, the remaining options do not accurately describe a deductible. The total payout amount of the policy refers to the maximum limit that can be claimed, the percentage of loss payable by the insurer pertains to the coinsurance clause or coverage limits rather than the deductible itself, and the limit on total claims speaks to the policy's overall maximum payout rather than the initial out-of-pocket expense required by the insured. Each of these concepts serves different purposes and is distinct from the definition of a deductible.