What is the purpose of insurance deductibles?

The purpose of insurance deductibles is primarily to reduce the number of small claims that an insured party may file. A deductible is the amount of money that the policyholder must pay out-of-pocket before their insurance coverage kicks in. By having this financial responsibility, insured individuals are discouraged from submitting claims for minor damages or losses, as they would have to cover the deductible themselves. This not only helps insurers manage their costs and maintain affordable premiums but also encourages policyholders to be more mindful and responsible regarding their property.

The other options do not accurately reflect the function of deductibles; they do not ensure that claims are paid in full, they are not designed to increase premiums, nor do they only cover total losses. The primary focus is on reducing the frequency of small claims, which can help keep overall insurance costs lower for everyone involved.