Which of the following best describes 'deductible' in an insurance context?

In the context of insurance, a deductible refers specifically to the amount that a policyholder is required to pay out-of-pocket before the insurance company begins to cover the costs associated with a claim. This means that if an insured individual files a claim, they must first meet their deductible amount; only then will the insurer step in to pay for the remaining costs up to the policy limits.

For instance, if a motor insurance policy has a deductible of $500 and the total damage costs amount to $2,000, the policyholder would pay the first $500, and the insurance would cover the remaining $1,500. This mechanism is designed to encourage responsible use of insurance and can also help keep premium prices lower as it reduces the number of small claims that insurers have to handle.

The other options do not accurately capture the essence of a deductible. One option suggests that the insurer pays a certain amount before a claim is submitted, which misrepresents how deductibles function. Another option speaks about total coverage amounts, while another refers to fees charged by insurance agents, both of which are unrelated to the concept of deductibles in insurance.