What is the purpose of a deductible in an insurance policy?

A deductible in an insurance policy serves the purpose of requiring the policyholder to pay a certain amount out-of-pocket before the insurance coverage kicks in. The use of a deductible helps to manage and limit the number of small claims that can be costly for insurance companies to process. By incorporating a deductible, insurers can reduce administrative costs associated with handling numerous minor claims, which can be more expensive than the claims themselves, thereby streamlining the claims process. This system encourages policyholders to be more selective about filing claims for minor losses since they must bear some of the cost themselves. Thus, option C correctly captures this essential aspect of how deductibles impact claims management and the overall functioning of an insurance policy.