What does a deductible provide to the insured in terms of premiums?

A deductible is the amount that an insured is required to pay out of pocket before the insurance company begins to pay for covered losses. This mechanism plays a significant role in how premiums are calculated. Typically, higher deductibles can result in lower premium costs because the insured takes on more financial risk in the event of a claim. This is appealing to many policyholders who prefer to save on their monthly or annual insurance premiums.

In contrast, if an insured opts for a lower deductible, the insurance company generally charges higher premiums since the insurer assumes more risk. This dynamic provides policyholders with premium flexibility since they have the option to choose a deductible that aligns with their financial situation and tolerance for risk. Thus, the correct choice highlights the relationship between deductible amounts and the flexibility policyholders have concerning their insurance premiums.