What term refers to the percentage of a claim that the insured is required to pay out-of-pocket?

The term that refers to the percentage of a claim that the insured is required to pay out-of-pocket is known as a deductible. A deductible is a specified amount or percentage that the insured must pay before the insurance coverage kicks in and the insurer pays the remaining balance of the claim. For example, if a policy has a $1,000 deductible and a claim amount of $5,000 is made, the insured would pay the first $1,000, and the insurance company would cover the remaining $4,000.

Understanding the role of a deductible in insurance policies is crucial because it directly affects how much the insured will have to pay when a loss occurs and how much the insurance company will ultimately pay. Deductibles can vary based on the type of coverage and the specific insurance policy, and they serve as a cost-control measure for insurers by discouraging small claims.

Other terms, such as copayment, refer to fixed fees paid for specific services (mostly in health insurance), percentage discount relates to pricing and discounts rather than claims, and limit of liability indicates the maximum amount an insurer will pay under a policy, none of which defines the out-of-pocket expense that the insured needs to cover in the event of a claim.