Answer :
Final answer:
The cost that is always incurred when buying insurance is the premium, which must be paid regularly to keep the policy active. Other costs, such as deductibles and co-payments, are incurred only when specific conditions or services are utilized. Payouts, on the other hand, are amounts paid out by the insurance company when a claim is made and are not costs to the policyholder.
Explanation:
Understanding Insurance Costs
When purchasing insurance, there are several costs that a policyholder might encounter. Among these are premiums, deductibles, co-payments, and payouts. Here’s a breakdown of each:
- Premium: This is the amount paid for an insurance policy, usually on a monthly or annual basis. It is a regular cost that ensures that your policy remains active.
- Deductible: This is the amount you need to pay out of pocket before your insurance kicks in for a claim. While it is a significant cost incurred during specific circumstances, it is not a recurring payment like the premium.
- Co-payment: This is a fixed amount you pay for certain services, typically in health insurance. Similar to deductibles, they occur only when you utilize the service.
- Payout: This refers to the amount the insurance company pays out when a claim is made and an event covered by the policy occurs. Payouts are not costs incurred by the policyholder.
From this breakdown, it is clear that the premium is the only cost that is always incurred when buying insurance. No matter what circumstances arise, the premium must be paid to keep the insurance policy active.
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