What aspect of insurance do "deductibles" relate to?

Deductibles are a key concept in insurance that represent the amount of money the insured must pay out of pocket before their insurance coverage begins to pay for a covered loss. This mechanism is designed to share the financial burden between the insurer and the insured and to help limit the number of small claims that can be made against an insurance policy.

When a claim is filed, the amount of the deductible is subtracted from the total loss, meaning the insured is responsible for covering that initial cost. This feature can influence the cost of premiums as well; generally, higher deductibles can result in lower premium costs, as the insured is taking on more risk. Understanding deductibles is essential for individuals to effectively plan their insurance coverage and financial strategy.