Medical Insurance – A Basic Overview

Medical insurance refers to a type of insurance that pays for all your medical expenses. This type of insurance is available either through a government-sponsored program or from a private insurance company. It can be purchased by individuals or on a group basis; and in each case premiums have to be paid so that unexpected or expensive healthcare needs are taken care of.

If you look at medical insurance, it basically is a contract between the insurance company and the individual who takes out the contract. This is the policy and it can be renewed monthly or annually. The contract will also spell out the type of healthcare and to what cost coverage will be offered. Usually this information is available either in the contract or the Evidence of Coverage booklet.

When a person takes an individual policy, there are many different forms of payment options and obligations that need to be fulfilled. Some of them are mentioned below:

  1. Premium is the amount that the individual, also known as policyholder, has to pay each month to purchase health coverage.
  2. Deductible refers to the out-of- pocket expense that the policyholder is willing to pay before the insurance starts paying. The higher the deductible, the lower is the premium. Usually the policyholder will have to visit the doctor several times before he or she reaches the deductible and the health insurance starts paying for healthcare.
  3. Copayment is the amount a policyholder must pay out-of-pocket for a particular visit or healthcare service before the health plan pays for it. Usually copayment is made each time the policyholder avails a particular service.
  4. Exclusions refer to all healthcare and medical services that are not part of the insurance policy. These services have to be paid for by the insured.
  5. Coverage limit is when a medical insurance pays for healthcare up to a certain amount. Anything over and above this amount has to be paid by the insured.
  6. Coinsurance is when the policyholder pays a certain percentage of the total cost while the insurance policy pays the balance. Usually there is no upper limit for coinsurance and the insured can end up paying small or large sums depending on the cost of the medical service.

This may seem basic, but it important to have a framework of insurance coverage to start taking action to determine what will be your best plan and best price for medical health coverage.

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