Understanding Insurance Costs
An insurance policy's cost can involve more than its premium. Depending on the coverage, a policyholder may also face deductibles, coinsurance, copays, uncovered expenses or costs above policy limits. The policy contract controls.
Premium
A premium is the amount charged to maintain coverage. A $250 monthly premium equals $3,000 over 12 months if the premium remains unchanged.
Deductible
A deductible is an amount a policyholder may have to pay toward covered losses or services before certain insurer payments apply. Rules vary by insurance type and contract.
Coinsurance
Coinsurance is percentage-based cost sharing used in some policies. For example, under a simplified model with a $1,000 deductible and 20% customer coinsurance, a $5,000 covered claim would produce a $1,800 customer share.
Out-of-Pocket Maximums
Some health plans set annual limits on certain covered cost sharing. Premiums and some other expenses may not count toward the limit. Use the specific plan documents for exact rules.
Coverage Limits and Exclusions
Policies with similar estimated costs can provide different protection. Limits, exclusions, networks, covered events, benefit definitions and endorsements can materially affect coverage.