What is the term for the amount of loss you must pay out of pocket before insurance coverage kicks in?

The correct term for the amount of loss that a policyholder must pay out of pocket before their insurance coverage begins is "deductible." This is a crucial concept in insurance policies, as the deductible represents the initial financial responsibility of the insured individual when a claim is made.

In practical terms, if an individual has a deductible of $1,000 and they incur $5,000 in medical expenses, they must pay the first $1,000 themselves. Only after this amount has been paid will the insurance company start to cover the remaining expenses according to the terms of the policy.

Understanding the deductible is vital for managing one's finances and understanding how much insurance will effectively assist in covering costs after an incident occurs. This term forms part of the broader insurance vocabulary, which includes other related concepts like premium (the amount paid for the policy), co-pay (a fixed amount paid for a specific service), and out-of-pocket maximum (the limit on what an individual pays out of pocket in a policy period). Each of these terms represents different responsibilities and limits associated with insurance policies, but the deductible specifically addresses the initial expense threshold before coverage takes effect.