Answer :
Final answer:
The cost that is always incurred when buying insurance is the premium, which is the amount paid to maintain the insurance coverage. Other costs like deductibles and co-payments may vary depending on services used, but the premium is constant. Hence, choosing an insurance policy involves considering these different costs, with premiums being mandatory.
Explanation:
Understanding Insurance Costs
When purchasing insurance, several terms are important to understand, including premium, deductible, co-payment, and payout. Among these, the premium is the cost that must be paid periodically (usually monthly or annually) to maintain your insurance coverage. It is the one cost that is always incurred when buying insurance, regardless of whether any claims are made.
Here's a breakdown of the terms:
- Premium: The amount you pay to the insurance company for your policy.
- Deductible: The amount you need to pay out-of-pocket before the insurance company starts to pay for covered services.
- Co-payment: A fixed amount you pay for a specific service before your insurance covers the rest.
- Payout: The amount the insurance company pays you or your healthcare provider, typically after a successful claim.
For example, if your health insurance premium is $300 monthly, you pay that amount even if you don’t visit the doctor. On the other hand, deductibles, co-payments, and payouts depend on the type of healthcare you receive.
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