DEDUCTIBLES Meaning and
Definition
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Deductibles are a common financial term primarily used in insurance policies, referring to a fixed amount of money that an insured individual must pay out of pocket before their insurance coverage begins. It is essentially an initial financial responsibility that policyholders have to meet before the insurer starts to contribute towards the covered expenses. Deductibles are commonly employed in various types of insurance, such as health insurance, auto insurance, and homeowner's insurance.
The purpose of having a deductible is to allocate a portion of the financial liability to the insured person, encouraging them to share in the cost of their own claims. For instance, if an auto insurance policy has a deductible of $500, and a policyholder submits a claim for $5,000 in damages, they would be responsible for paying the first $500, with the insurance company covering the remaining $4,500.
Deductibles can be either fixed (flat), where a specific predetermined amount is applied to each claim, or they can be variable (percentage-based), in which case the deductible is calculated as a percentage of the total claim amount. The specific deductible amount is typically determined when the insurance policy is purchased, and it can have a direct impact on the premium cost. In general, higher deductible amounts lead to lower insurance premiums, as the insured individual is shouldering more of the financial burden in case of a claim.
In summary, deductibles represent the initial amount of money that a policyholder is responsible for paying before their insurance coverage kicks in, serving as a shared financial responsibility between the insured individual and the insurance company.
Top Common Misspellings for DEDUCTIBLES *
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Other Common Misspellings for DEDUCTIBLES
Etymology of DEDUCTIBLES
The word "deductible" comes from the Latin verb "deducere", which means "to lead away" or "to subtract". In the late 15th century, the term "deductible" was used in English to refer to something that could be taken away or subtracted. Over time, its usage evolved, and the term began to be specifically used in financial contexts to refer to an amount of money that must be subtracted or paid out of pocket before an insurance company starts covering the remaining costs. The term "deductible" became commonly used in the insurance industry during the 20th century, and it remains in use today to describe the same concept.
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