Virtually every human being has some sort of insurance policy covering him or her. Whether health insurance, auto insurance, or life insurance. Consequently, in the course of acquiring insurance, you are sure to encounter words like āDeductibleā or āPremiumā. It is important to gain adequate knowledge as regards these terms, hence the purpose of this article. In this article, we are going to examine these two concepts and compare them.
What is the difference between a deductible and a premium?
Deductible
A deductible is the amount of money you have to spend on your health care coverage expenses. This must occur first before your health insurance plan starts to cover any other expenditure. This deductible starts over at the beginning of each year, although there is no penalty if you donāt meet your deductible in a given year.
In a nutshell, specific services are regularly provided through your health plan without extra costs. These may include preventive care (e.g. annual checkups, etc). These aforementioned costs would not contribute to meeting your deductible. However, it varies, depending on factors such as; the plan, covered office visits and prescription drugs usually count towards a deductible. Note, however, that some plans don’t have a deductible.
Premium
Generally, a premium is the amount of money that your insurance company requires from you for the subject to the policy you have chosen. In other words, an insurance premium is the amount of money that an individual, person or a business entity pays in exchange for the coverage they have been offered by an insurance policy.
Therefore, the amount of your specific premium will depend on a variety of factors, which include; the type of policy, the likelihood that you might need to make a claim under the policy, and at your residence.
How is Insurance deductible and Premium related?
There is an inverse relationship between an insurance deductible and premium. In other words, as one increases the other decreases -This means that an insurance policy with a higher premium will have a lower deductible, and a lower premium a higher deductible.
Hence, it is very important that you make thorough findings of your deductible and premium options to select the best for your situation.
Does a higher deductible mean a lower premium?
Yes. In the insurance world, a higher deductible means a lower premium and vice versa. When looking to choose an insurance plan, deciphering the plan which suits your needs depends on what you are looking for.
Insurance coverage which offers lower monthly premiums is well suited for people who donāt frequently use medic-care services. This helps them save costs every month. However, if the need is to visit a health facility, you can expect that your bills would be higher than someone with a higher premium.
Which should I pay, a higher premium or a higher deductible?
This depends solely on your health condition. If you have a chronic disease or if you have an ailment that requires you to visit the hospital frequently, it is best to select a higher premium. This is because you will meet your deductible faster.
However, if you do not have to visit the hospital frequently, a higher deductible might be the best option for you. But in this case, you will spend more than someone with a higher premium if you have to visit the hospital.
Conclusion
Insurance is an enormous investment, and there is a possibility that you will make many purchases throughout your lifetime. When shopping for an insurance policy, choose one that suits your budget and fits your unique circumstance.