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SolveYourProblem
eLearning Series:
Health Insurance: Your Questions Answered
What does everything mean & how
to choose the right policy
( 18 pages )
DIFFERENT
TYPES OF
HEALTH INSURANCE POLICIES
Health insurance
is a legal contract between two or more parties that promises
certain performance in exchange for considerations. A health
insurance policy is considered a unilateral contract. This
is because only one party (the insurer) is required to fulfill
their obligation. While a policy owner may decide to terminate
premium payments, as long as the payments are paid the insurer
must meet their responsibility under the contract.
A health
insurance policy can provide just one or any combination
of certain benefits:
- Hospital, medical
and surgical expenses resulting from sickness or an accident
- Accidental
death or dismemberment
- Disability
resulting from accident or sickness (sometimes this can
also be referred to as “loss of income” or “loss of time”
An accident is
an injury that occurs accidentally. A sickness is an illness
or disease that is not the result of an accident. Knowing
the difference is important because policies may have different
provisions that apply to accidents or sickness. Also, there
are some companies that sell a separate accident policy that
does not include sickness.
The terms accident
and sickness are widely used and often interchangeable in
any discussion of health insurance. They are often abbreviated
as A&H and A&S. Health insurance is also referred
to as medical insurance.
As we discussed
above, health insurance is designed to protect again
two types of economic loss. Loss of income and expenses
for medical care which places them in either of two broad
policy categories:
- Disability
income policies
- Medical expense
policies
Disability
income policies can also be referred to as loss
of income, loss of time or replacement income. This type
of policy will pay benefits to an insured who is disabled
and can no longer work to earn a regular income. Payments
can be weekly or monthly depending on the policy.
Medical
expense policies are represented by a wide range
of coverage from very minimal to comprehensive packages
with multiple coverage. Some include both accidents and
illnesses, various hospital expenses and other costs pertaining
to medical care such as:
- Accident and
sickness policies
- Hospital policies
- Basic medical
expense policies
- Major medical
expense policies
- Comprehensive
medical expense policies
Any of these policies
might cover various combinations of the above and may be
paid in a lump sum.
Accident
Policies. Some policies cover only accidents and
not illness. As you might imagine, policies like this are
very specific about what is considered an accident.
It is important
to understand what is defined as an accident as it pertains
to the health insurance industry. . .an accident is an event
that is unforeseen and unintended.
Keep in mind that
any discussion of this type of policy also applies to any
type of policy that includes accidental coverage not just
accident specific policies.
Accident benefits
are most commonly paid for accidental loss of life (also
called accidental death), accidental loss of limb or sigh
(dismemberment), loss of time and/or income, hospital expenses,
surgical expenses, and medical expenses like visits to the
doctor.
Let’s expand a
bit on dismemberment. As we said, this would be loss of limb
or sight, however, different states have statutes that define
dismemberment and they can vary from state to state. This
is a subject that you need to discuss with your insurance
agent to determine what actually constitutes dismemberment
in your state.
Accidental
Death Benefit can also be referred to as “principal
sum.” This type of coverage should not be confused with
life insurance. There is a world of difference between
the two. Life insurance policies will generally regardless
of the cause of death. An accidental benefit is paid ONLY
if the death is accidental as opposed to a death by natural
causes or illness.
The person who
received the death benefit is called the beneficiary.
The policy owner has the right and responsibility of naming
beneficiaries. Usually there is a primary beneficiary however
he/she can assign a second and even a third beneficiary.
The primary
beneficiary is the first person in line to receive
the benefit in the event of the death of the policy holder.
They can also name a second beneficiary who would receive
the benefit in the event the primary beneficiary dies before
the insured. Some policies can include a third beneficiary
who would be in line after the first two.
There is much
more to be learned about accidental death policies, but we
would like to mention one important element before we move
on. An accidental death may not be instant. A person can
die as a result of an accidental injury months after the
accident occurrence. Read your policy carefully because most
stipulate that the accidental death benefit will only be
paid if death occurs within three months of the accident.
 
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