What role does a deductible play in a dwelling policy?

A deductible is a specific amount that a policyholder must pay out of pocket before their insurance coverage begins to cover a claim. This means that if a loss occurs, the insured is responsible for the deductible amount, and only the costs that exceed this deductible are covered by the insurance policy. This mechanism serves several purposes. First, it helps to lower insurance premiums; since policyholders share some of the financial burden, insurers are able to reduce premium costs.

In addition, deductibles help to prevent minor claims, as policyholders may be less likely to file a claim for small amounts that they would rather cover themselves. The deductible is a critical part of the policy, as it establishes the point at which the insurer starts to pay out for covered losses, making option B the accurate representation of its role within a dwelling policy.