what is the difference between deductible and premium?
There is quite a bit of difference between an insurance premium and an insurance deductible. An insurance premium is what companies call the cost of maintaining the insurance policy. It’s what you spend each month or year to ensure your insurance stays active.
An insurance deductible, on the other hand, is the cost you’ll pay out of pocket prior to submitting a claim on your insurance. It’s a smart move to have the amount of your insurance deductible tucked away in a savings account, in case something unexpected happens.
There is a correlation between insurance premiums and insurance deductibles, however. Typically, you will pay lower premium prices to maintain your insurance if you agree to a higher deductible price, while if you want a lower deductible that would be easy to pay at a moment’s notice, you’ll likely wind up paying more for your monthly insurance premium.
Your best bet is to take a honest look at your month-to-month expenses and your savings rate before deciding on an insurance policy. If you choose a policy that you can afford the premium but not the deductible, it’s not going to be of much use when an accident or illness occurs.