What does the term deductible mean in casualty insurance?

In casualty insurance, the term deductible refers to the specific amount of money that the policyholder is required to pay out-of-pocket before the insurance coverage takes effect for a claim. This means that if a loss occurs, the insured must first cover this predetermined portion of the expense or damage, and only after that will the insurer reimburse the remaining costs that exceed the deductible.

Having a deductible helps manage risk between the insurer and the insured, encouraging policyholders to use the insurance for larger losses while avoiding minor claims. The deductible can be set as a fixed dollar amount or may vary based on the policy type, but its primary function is to share the burden of the financial loss, thus fostering a level of responsibility in the insured.

The other options touch on different elements of insurance concepts, such as claim reimbursement limits or retention of risk by the insurer, but they do not accurately define what a deductible is or how it functions within casualty insurance policies. Understanding the role of the deductible is crucial for policyholders in effectively managing their insurance needs and expenses.