What is a deductible in commercial casualty insurance?

A deductible in commercial casualty insurance is defined as the initial amount that the insured is responsible for paying out of pocket before the insurance coverage kicks in and the insurer begins to cover any additional claims. This means that the insured must absorb this initial cost in the event of a loss, which helps to mitigate small or frequent claims and reduces the overall risk for the insurer.

This structure benefits both parties: it encourages the insured to take precautions to avoid losses since they have some financial stake in the outcome, and it lowers the premiums that insureds would otherwise face if insurers covered all losses without such a cost-sharing arrangement.

Understanding the role of a deductible is critical, as it can impact the overall cost of coverage, the insured's financial responsibility in the event of a loss, and the insurer's handling of claims.