Explain the term "deductible" in a commercial property insurance policy.

In a commercial property insurance policy, the term "deductible" refers to the specific amount of money that the insured is responsible for paying out of pocket before the insurance company will cover the remaining costs associated with a claim. This deductible serves as a cost-sharing mechanism between the insurer and the insured.

When a loss occurs, the deductible amount is subtracted from the total claim amount. For example, if a commercial property incurs damage resulting in a $10,000 loss and the deductible is $1,000, the insured would need to pay the first $1,000, and the insurer would then cover the remaining $9,000. This process helps to reduce the number of small claims filed, as policyholders will need to absorb a portion of minor losses themselves.

It is important to understand that the deductible can influence the premium costs of a policy. Typically, higher deductibles lead to lower premiums, as the insured is taking on more risk, and vice versa.