Understanding Deductibles and Premiums

 

When it comes to insurance, two key terms you'll encounter are deductibles and premiums. Both play a significant role in determining how much you pay for your insurance and how coverage is applied.

1. Deductibles

A deductible is the amount you pay out-of-pocket for covered services before your insurance starts to cover expenses. For example, if you have a $1,000 deductible, you must pay $1,000 before your insurance kicks in.

• Example: If you have a $1,500 medical bill and a $1,000 deductible, you will pay the first $1,000, and your insurance will cover the remaining $500, depending on your policy.

2. Premiums

A premium is the amount you pay regularly (monthly, quarterly, or annually) to keep your insurance coverage active. The premium is essentially the cost of having insurance, and it is paid regardless of whether you use the coverage.

• Example: If your monthly premium is $150, you pay this amount every month to maintain your health, auto, or home insurance, even if you don’t make a claim.