If you would have ever bought an insurance policy then you would have paid an insurance premium. If you are planning to buy an insurance policy then you have heard your agent talking about the premium of the insurance policy. Now, do you know that what exactly does this term ‘Premium’ means? Well, here is a definition of some of the important terms in the insurance sector.
What is an Insurance Premium?
So talking about the definition of Insurance Premium, it is the mandatory amount that you need to pay to the insurance company so that you remain under the insurance cover.
The frequency of this insurance premium can vary as per your choice and you can choose between paying the insurance premium monthly, quarterly, semi-annually and even annually. Most of the insurance service provider offers some discount on the annual payment of the insurance premium.
How much is the Insurance Premium?
It should be noted that the insurance premium can vary widely from one person to another as there are many factors that impact the insurance premium for you. For example, if you are buying a health insurance, then the factors deciding your premium would be
So, for the insurance policies, the premium can vary a lot and most of the times, the premium amount would differ from one person to another.
This was all about Insurance Premium. So let us now talk about the Insurance Deductible.
What is Insurance Deductible?
Well, we are not talking about the tax deductions here and it is very much different from Insurance Deductible. Coming to the point, Insurance Deductible is the amount that you would have to pay before the insurance company covers for any loss. This can be a fixed amount or this can be in terms of the percentage as well. This is also one such factor that would decide your premium of the insurance policy.
Let us explain the concept of Insurance deductible with an example. For example, you have an auto insurance that has a fixed deductible of $100. Now, in an unfortunate event, you meet an accident and your car is damaged. The total cost of car repair is around $1500. Now, you would have to pay $100 before the insurance covers up the loss of balance $1400.
These were two important terms when we talk about the insurance policy and if you can afford a higher premium then you can opt for a lower insurance deductible. In addition to this, never give false information to the insurance service provider as this can leave your insurance policy invalid.