What is the definition of a deductible in an insurance policy?

A deductible in an insurance policy is defined as the flat amount the insured pays out of pocket before the insurance company starts to pay for covered expenses. This mechanism is designed to share the risk between the insurer and the insured, ensuring that the insured has a financial stake in the claim. By requiring the insured to pay a portion of the loss, deductibles can help reduce the number of small, frivolous claims, which can keep overall insurance costs lower for all policyholders.

In this context, the other options do not accurately describe a deductible. The maximum payout in the event of a loss pertains to limits of coverage rather than the insured's responsibility prior to insurance payment. The total value of all insured properties refers to the insured's assets rather than their financial responsibility in the case of a claim. The value of losses covered by insurance relates to the extent of coverage, not the initial amount that the insured must pay before benefits are applied.