# How to Calculate Your Insurance Costs

When you understand your insurance costs, you can make better decisions about the type of policy that’s right for you and the kind of coverage you need. While this is true of all insurance, this guide highlights health insurance costs to illustrate the concepts you need to know. There are plenty of effective health insurance costs calculators available, including this free calculator from Healthcare.gov.

## How Do You Calculate Insurance Premiums?

When you buy a new car, most people mainly think about their monthly payments. That’s pretty much what premiums are: monthly payments that your insurance charges. Insurance premiums differ from insurance company to insurance company and from individual to the next. What factors are used to calculate your car insurance cost? Several, including the applicant’s age, history and overall health. Premiums are calculated by an insurance company’s underwriting department, which gathers information and analyzes it to predict the likelihood that you’ll make a claim.

## Coinsurance/Copay

The premium isn’t the only figure you need to consider. The copayments and coinsurance represent the amount that you pay toward your bill. Copay is the set rate that you pay upfront when you receive services. For example, you might have a \$15 copay to see your primary physician. That would be paid when you go see your doctor. Coinsurance is the percentage of your bill you’ll have to pay with the remainder of the bill paid by your insurance plan.

## Deductible

The deductible refers to your out of own pocket costs before your insurance covers your bills. For example, if you have a policy with a \$500 deductible, you’ll have to pay \$500 toward the costs before your insurer starts making payments. If you have a bill for \$2,000, you’ll have to pay that deductible. Your insurance company will then make their payments on the remaining \$1,500 based on the type of coverage or the policy you hold. In general, the larger the deductible, the lower your premium, as Healthcare.gov notes.

## Out-of-Pocket Maximum

Each type of policy includes a set limit that represents the most you’ll have to pay out of your own pocket. If you reach that maximum over the course of the year, your insurance will completely pay the rest of your bills. This is a notable figure because it represents the max that you can expect to pay toward your bills aside from your premiums.

## Tips for Choosing Insurance Policies

Premiums and other plan details like copays, deductibles and out-of-pocket maximums vary. To find the insurance policy with the lowest overall costs for you, it helps to shop around whenever possible. To decide on the right policy, it also helps to gauge how much you’ll need to use it. If you expect to make rare claims, buying a policy with the lowest premium could make the most sense. You’ll pay less upfront, but you will pay more when you actually use the insurance. If you expect to use your insurance frequently, you may want to look for a policy with lower copays, coinsurance, deductibles and out-of-pocket maximums.

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