Idaho Property and Casualty Practice Exam 2025 - Free Practice Questions and Study Guide

A deductible in an insurance policy refers to the specific amount that the insured must pay out-of-pocket before the insurance company begins to cover the remaining costs of a claim. This mechanism is designed to share the financial burden between the insurer and the insured, encouraging responsible use of insurance and reducing the number of small claims.

When a policyholder files a claim, they must first cover the deductible amount themselves. For example, if the deductible is set at $1,000 and the total claim amount is $5,000, the insurance company would only begin to pay after the insured has paid that initial $1,000. This structure helps to minimize claims for minor damages and promotes a sense of responsibility among policyholders.

The other choices describe different aspects of insurance policies but do not accurately define what a deductible is. Some discuss coverage limits or costs unrelated to deductibles, which are not applicable in this context.