What is the amount that the insured is responsible for paying out of pocket before the insurance coverage kicks in?

The amount that the insured is responsible for paying out of pocket before the insurance coverage activates is known as a deductible. In insurance policies, the deductible is the specific dollar amount or percentage that must be paid by the policyholder before the insurance company will pay for covered losses. This structure is designed to share the risk between the insurance provider and the insured, encouraging the insured to avoid small claims and helping to reduce the overall cost of insurance.

In contrast, subrogation refers to the process where an insurance company seeks reimbursement from a third party that caused a loss after it has paid out a claim. Indemnity is the principle that an insured should be restored to their financial position before a loss occurred, rather than gaining financially from a claim. Salvage involves recovering and selling damaged property to reduce the insurer's loss after a claim. Each of these terms has a distinct meaning and function within the realm of insurance, but the deductible specifically addresses the initial out-of-pocket cost for the insured before insurance benefits are activated.