What is a 'deductible' in a casualty insurance policy?

Deductible: The amount the INSURED must pay OUT OF POCKET on a covered loss BEFORE the insurer pays.

Example: With a $500 deductible on a $3,000 covered loss, the insured pays $500 and the insurer pays $2,500.

Purpose: Reduces the number of small claims (the insured handles minor losses); lowers the insurer's costs and thus the PREMIUM (higher deductible = lower premium, and vice versa); gives the insured a stake in preventing losses; COMMON in: auto physical damage (collision/comprehensive), property coverage; LIABILITY coverage typically has NO deductible (or different structures); SELF-INSURED RETENTION (SIR): Similar concept in some commercial policies; CHOOSING a deductible: Balance lower premiums (higher deductible) against affordable out-of-pocket cost at claim time; deductibles are a fundamental policy provision on the casualty exam — the insured's out-of-pocket share that reduces small claims and affects the premium.