Premiums, deductibles and copays

Three terms you will come across with any insurance plan are premium, deductible and copay.

Here’s a quick overview of all three.

What’s a premium?

Your premium is the set rate that you pay for your policy. Depending on the policy you purchase, you may pay this every year, semester, quarter, or month. In general, the more you pay at once, the less you pay overall, usually making an annual premium the cheapest option.

The main factors that can impact the cost of an insurance premium are the type of coverage, the amount of coverage, your personal situation and competition in the market:

• Type of coverage: opting for comprehensive coverage will increase the cost of the premium.
• Amount of coverage: the greater the amount of coverage, the greater the premium.
• Your personal situation: anything from your insurance history to your job can impact the cost of your premium.
• Competition in the market: if your demographic is a primary target for insurance companies, it is possible that your premium will be lowered in order to entice you.

What’s a deductible?

Your deductible is the amount of money you are responsible for paying before your insurance company will step in. A high-premium policy will have a lower deductible while a low-premium policy will have a higher deductible.

A policy may have a single deductible or different deductibles for different types of claims. For example, your policy may state that you are responsible for the first $5,000 in claims, or a home insurance policy may have one deductible for fire damage and another for earthquake damage. Deductibles can be listed as dollar amounts, or percentages of the claim or the value of the item being insured.

What’s a co-pay?

A co-pay is a specific amount you must pay every time you seek items or services that are covered by your policy. This is most commonly used in health insurance coverage, for prescription medication or doctor’s visits. As with deductibles, a higher premium usually means a lower co-pay while a lower premium usually means a higher co-pay.

Getting the right policy

In order to get the right policy for you, you need to consider how these three items work with each other and what works best for you. To get the best plan for your needs, it’s usually a good idea to speak to an experienced insurance broker.