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

The term "deductible" in an insurance policy refers to the amount that an insured must pay out of pocket before the insurance company begins to cover the remaining costs. This mechanism is designed to help prevent minor claims and encourage policyholders to take responsibility for smaller losses. For example, if a policy has a $500 deductible and a claim amount of $2,000, the insured would first pay the $500 deductible, and the insurance coverage would then cover the remaining $1,500.

In contrast, the other options address different aspects of insurance policies. The overall limit of coverage refers to the maximum amount a policy will pay for a covered loss. The percentage of co-insurance is related to the cost-sharing aspect of insurance where the insured pays a certain percentage of a claim after the deductible is met. The timeline for filing claims pertains to the deadlines imposed on policyholders for submitting claims, which is separate from the concept of the deductible itself. Understanding the role of a deductible is crucial for managing insurance costs effectively and making informed decisions about coverage.