What does the term 'deductible' refer to in property insurance?

In property insurance, the term 'deductible' specifically refers to the portion of a loss that the insured must pay out of their own pocket before the insurance company begins to cover the remaining amount. This means that when a claim is made, the insured is responsible for paying this predetermined amount first, and the insurer will then cover the costs that exceed the deductible limit.

For example, if a property suffers damage estimated at $10,000 and the policy has a $1,000 deductible, the insured would pay the first $1,000, and the insurer would cover the remaining $9,000. The purpose of a deductible is to reduce the number of small claims and encourage policyholders to take care of their property.

The other options describe different aspects of property insurance but do not accurately define what a deductible is. The amount paid by the insurer represents the compensation provided after the deductible has been accounted for, while the total value of the property covered indicates the sum insured but does not touch upon the insured's portion of the loss. Lastly, the cost of the insurance policy refers to the premium paid for the coverage, not the deductible amount involved in claim scenarios.