What is the term for the money that the insured pays before the insurer covers the remaining loss?

The term for the money that the insured pays before the insurer covers the remaining loss is known as a deductible. A deductible is an amount that the policyholder is responsible for paying out of pocket when they make a claim on their insurance policy. It serves as a cost-sharing measure between the insured and the insurer and is typically specified within the terms of the insurance policy. For instance, if a policy has a deductible of $500 and the insured incurs a loss of $2,000, the insured would pay the first $500, and the insurer would then cover the remaining $1,500.

This concept plays a key role in how insurance works, as it helps to reduce the number of small claims and keeps premiums lower. By requiring policyholders to bear some portion of the loss, it encourages them to be more mindful of risks and damages.