Answer :
Final answer:
The premium is the cost that one always incurs when buying insurance. It is the amount paid periodically to maintain the policy. Other costs, like deductibles and co-payments, occur under different circumstances and are not constant costs at the point of purchase.
Explanation:
Understanding Insurance Costs
When buying insurance, there are various terms related to costs that are important to understand. Among these, the one that is always a cost when purchasing insurance is the premium.
Key Terms Explained
- Premium: This is the amount you pay for your insurance policy, usually paid monthly, quarterly, or annually. It is a consistent cost that policyholders incur, regardless of whether they file a claim.
- Deductible: This is the amount you must pay out-of-pocket before your insurance coverage kicks in. While it contributes to the overall cost of insurance, it's not a cost you pay at the onset of the policy.
- Co-payment: This is a fixed amount you pay for a specific service, such as visits to the doctor, once your deductible has been met. Like the deductible, this may vary, but it is not a cost incurred at the time of policy purchase.
- Payout: This refers to the money that an insurance company pays you after a claim is approved. This is not a cost but rather a benefit of having insurance.
In summary, the premium is the cost that must be paid to maintain active insurance coverage, making it a crucial part of the overall insurance experience.
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