What is the purpose of a health insurance premium?

The health insurance premium is the amount paid periodically, typically monthly, quarterly, or annually, to maintain an insurance policy’s coverage. This payment is essential because, without paying the premium, the insurance provider can cancel the policy, and the insured would not have access to the benefits. It's similar to paying for a subscription to a service; the premium ensures continuous coverage and access to the agreed-upon healthcare benefits.

In contrast, the total amount of claims paid out by the insurer pertains to the benefits utilized by policyholders and is not directly related to the concept of a premium. The coverage limit refers to the maximum amount that an insurance policy will pay for covered services, which is a different aspect of the policy. Lastly, the fee charged for health services used relates to out-of-pocket expenses incurred by the insured when accessing healthcare, which again is distinct from the premium that maintains the overall policy. Thus, the essence of the premium lies in its role as a payment that secures ongoing insurance coverage.