What is Health Insurance?

Health Insurance is a financial plan whereby clients pay a premium, usually monthly, or annually, in exchange for the assurance that, should the need arise, unexpected health expenses will be covered by the plan. Every day, unforeseen medical problems occur. People have their lives turned upside-down, literally overnight, by a serious condition such as cancer, or perhaps a heart attack. Apart from the inherent stress caused by the illness, such occurrences often place additional strain due to financial burdens. Often, medical bills for these conditions can bury people in debt and, even, prevent them from receiving the best treatment possible, due to their inability to pay. If such a person were insured, however, they would have all their medical expenses covered by the plan (up to a pre-determined maximum), removing the financial strain. In other words, when someone buys into a health insurance plan they are, in effect, buying "peace of mind".

Health Insurance works by "risk management". The insurance company puts together a financial schedule that ensures that money will be available to pay for all client claims, based on pre-determined likelihood of such events, as specified by the plan. In somewhat simpler words, the clients of a health insurance company share the risk of expensive medical events among themselves. If, for example, one in ten policy-holders has an emergency, his money, and that of the other nine that suffered no loss, would be used to cover his expenses. This is the general idea behind all forms of insurance.

When purchasing a health plan, certain specifications will be discussed. The three most critical aspects of the plan are the premium, the coverage limit, and relevant exclusions. The premium refers to the monthly, or annual, payment made to remain on the plan. This will vary depending on the other two factors mentioned above, and the insurance company, in question. The coverage limit specifies the maximum benefit available under the selected plan (after which the client is responsible for additional costs). Finally, the exclusions are simply those emergencies not covered under a particular plan. For example, some plans may not cover healthcare costs due to accidents and may, instead, focus on natural emergencies. A serious car accident, rendering a person severely wounded, would fall under the exclusions of such a plan and the person would have to pay out-of pocket, or secure funds in some other way.

One other term often used is a deductible. This is the amount of money that, for a specified time period, the patient must pay on his, or her, own before qualifying to have their expenses covered by insurance. Once this limit has been reached, subsequent costs are paid by the company, unless otherwise specified in the plan.

Health Insurance is a great investment that secures peace of mind for friends, and family, who might otherwise have been faced with great financial burden, in the event of illness. Less time, and energy, can be spent on worry over paying for treatment, and more can be dedicated to making a full recovery.