What is the function of a "deductible" in an insurance policy?

A deductible in an insurance policy serves a specific function: it is the amount that the insured must pay out-of-pocket before the insurance company begins to cover any claims. This mechanism is designed to share the financial burden of losses between the insured and the insurer.

By requiring the insured to pay a certain amount first, the deductible helps minimize the number of small, frequent claims made to the insurer. This both encourages policyholders to take care in managing risks and helps keep insurance premiums lower, as the insurance company is not covering minor losses.

In contrast, other choices do not accurately define the role of a deductible. The total amount insured refers to the maximum payout under the policy, while the premium payment frequency relates to how often the insured pays for the coverage. The remaining balance of coverage after a claim is paid does not involve the initial financial responsibility of the insured before a claim can be filed. Thus, the distinction of the deductible is crucial in understanding how insurance policies operate and the financial responsibilities of the insured.