Answer :
Final answer:
The premium is the cost that is always incurred when purchasing insurance, as it is the recurring amount paid regardless of other expenses like deductibles or co-payments. Other terms like deductibles and co-payments relate to costs that may occur when making claims. Understanding these terms helps clarify financial responsibilities in health insurance.
Explanation:
Understanding Insurance Costs
In the context of buying insurance, the term that is always a cost is the premium. Here are definitions for the key terms:
- Premium: The amount a policyholder or their sponsor must pay to obtain insurance coverage. This is a recurring cost that must be paid regardless of whether claims are made.
- Deductible: The amount the insured must pay out-of-pocket before the insurance company begins to cover any health care costs. For example, if the deductible is [tex]$500, this amount needs to be paid by the policyholder before insurance takes over.
- Co-payment: This is a fixed amount an insured person pays for specific services, like a doctor's visit, before insurance covers the rest. For instance, a $[/tex]20 copayment would be paid each time a visit to the doctor occurs.
- Payout: This refers to the amount an insurance company pays to cover claims after a deductible and copay have been applied. However, this is not a direct cost to the insured.
Thus, while the deductible, co-payment, and payout can represent costs or responsibilities at different times, the premium is a cost that is consistently incurred while maintaining insurance coverage.
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