Insurance terminology

0:00- Now let's talk about some of the words you're likely to hear if you're dealing with insurance. So the first one is a premium or an insurance premium, and that's really just what you're paying in order to get the insurance. So if you pay, let's say $200 a month for health insurance, that $200 a month is your premium.

0:21Now the other number or the other word you'll hear a lot is deductible. Now this is an amount of money that you're going to have to pay and then only when you get above that amount, then the insurance kicks in. So let's say your health insurance has a $5,000 deductible, and let's say you have to go through some type of, and let's say it's the beginning of the year.

0:41Usually it's based on a calendar year, and you have to get some type of healthcare done, and it costs $2,000. Well, you're going to pay that $2,000 out of pocket. You're going to pay that yourself, because you haven't hit the deductible yet. Let's say you have to go in that same year, do another thing that costs $3,000.

1:01Once again, you're going to pay that out of pocket, which is just another way of saying you're gonna pay that yourself. It's not gonna come through insurance, but so far you have paid $5,000, $2,000 for the first thing, $3,000 for the second thing. And now if you were to go and let's say have to get a another $5,000 procedure done in that same year, now the insurance will kick in because you used up your deductible.

1:24So if there's a $5,000 deductible, and you'll see it on health insurance, you'll see it on car insurance. You pay that first amount, and then the insurance kicks in above and beyond that. Now you might say, "Well, why would I ever have or want a deductible?" Well, usually the higher the deductible, the lower your premium.

1:40You usually have to pay less for insurance that has a high deductible. From an insurance company's point of view, they say, "Okay, the deductible is kind of an incentive for you to not necessarily use this service, you know, get your car in a wreck all the time, or necessarily have to go to healthcare all the time."

1:56And from your point of view, you might say, "Hey, you know what? I really, I'm willing to take a deductible, because at the end of the day, insurance is really for if the bills become really, really, really large." So just another example. Let's say your car insurance has a $5,000 deductible.

2:12Well, I'll use a different number. Let's say your car insurance has a $1,000 deductible, and then you were to get into some type of a fender bender, and the mechanic says, "It's gonna cost $3,000 to repair this car." Well, then you would file a claim with your insurance company, that's saying, "Hey, something happened.

2:30I'm gonna need to get paid out a little bit, 'cause I've been paying this premium all this time." And the insurance company says, "Okay, we'll pay it, but you have a $1,000 deductible. So you pay that $1,000 out of pocket, and then we are going to pay the remaining $2,000 for that total of $3,000 for the repair."

2:46Now, the last thing I'll talk about is, there's oftentimes some type of limit to the insurance policy, or sometimes they'll call it a policy limit, and that's this idea that the insurance might cover you up to a certain amount. So let's say you have liability insurance.

3:03That's really just insurance in case someone sues you for doing something wrong. Usually that has a limit to it, so it might have a $100,000 limit or $500,000, whatever it means. And what that means is, let's say someone sues you, and if the court decides that you have to pay them $100,000, let's say your limit is $100,000, then the insurance company will pay the $100,000.

3:24But let's say the court decides that you owe that other person who just sued you for some type of liability. Let's say you have to owe them $125,000. Well, then the insurance company will go up to the 100,000 and then you're gonna have to pay that other $25,000 out of pocket.

3:39One last word now that I really think about, is the notion of a copay, and you're gonna see a copay a lot when you're thinking about health insurance, whether it's health insurance or dental insurance. And that's this idea that let's say you go for your regular checkups, either your dental checkups or your healthcare checkups.

3:56You might see copays at other places. The actual cost of that checkup might be three or $400, and the insurance company says, "You know what? We will cover some of this, what we'll call preventative care," which is care that, you know, checkups, make sure you don't get sicker.

4:10And it makes sense for insurance companies to do that, because the sicker you get, the more expensive your health bills could get. But they say, "There is some amount that you have to pay alongside us," so that's what the copay is. So for example, with my health insurance, I go, I get a checkup, I have to pay a $20 copay.

4:28It might cost a few hundred dollars of what the insurance company's paying, but I pay $20 alongside that. So hopefully you're a little bit more knowledgeable about some of the words of insurance. I obviously, I didn't know all of these words until, honestly, I had left college and I had to get insurance myself.

4:43So if you already know these, and especially if you haven't got, you know, if you're younger, you're very much ahead of the curve.