Answer :
Final answer:
The cost that is always present when buying insurance is the premium, which is the regular payment made to maintain coverage. Other costs include deductibles, co-payments, and payouts, but only the premium is necessary for securing insurance. Understanding these terms helps in making informed decisions about insurance plans.
Explanation:
Understanding Insurance Costs
When purchasing insurance, there are several terms that are important to understand in relation to costs. The term that represents a cost that is always incurred when buying insurance is premium.
The premium is the amount paid, typically on a monthly or annual basis, to maintain the insurance coverage. It is a mandatory cost that the policyholder must pay regardless of whether they make a claim. For instance, if you have health insurance, you must pay your premium every month to keep your policy active.
Other Insurance Terms
It's essential to differentiate the other terms:
- Deductible: This is the amount you pay out of pocket before your insurance kicks in. For example, if you have a $500 deductible, you must pay that amount for covered services before your insurance starts to pay.
- Co-payment: This is a fixed fee you pay for specific services or prescriptions, often encountered in health insurance plans.
- Payout: This refers to the money the insurance company pays to the policyholder or their beneficiaries when a claim is made.
In summary, while the deductible, co-payment, and payout are relevant to how insurance operates, the premium is the consistent cost that must be accounted for when you decide to purchase any insurance policy.
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