Understand Life and Health Insurance

Getting to Understand Life and Health Insurance

Many people understand the importance of having sufficient life and health insurance, but buying this coverage can be confusing and complicated at times, and so they do nothing. However, if you get to understand life and health insurance, making a decision to obtain coverage need not be difficult or expensive, and can secure you and your family's financial future. The assurance that you have insured against the destructive financial impact of injury, sickness and death brings with it peace of mind that makes this insurance all the more valuable.

Understanding Life Insurance

Life insurance is an essential element of any sound long-term financial planning. While it is called "Life" insurance, it actually insures you against your death, paying out a specific dollar amount when you die. Life insurance is especially critical if you have dependants, because losing you and your income can be financially devastating to your family.

Life insurance is an effective way to help ensure that your loved ones will be financially provided for should anything happen to you. Admittedly, mere money cannot make up for their loss, but the benefits paid out by an insurance policy will mean that they won’t have to deal with the added stress of financial loss. In the event of your death, financial commitments like mortgages, bills and debts will be covered.

Types of Life Insurance

There are two main categories of life insurance - term life and whole life. The coverage and policy rates in each category are designed to meet the needs of different types individual financial situations and objectives.

• Term life insurance - This is the simplest, least expensive type of life insurance policy. A term policy has one, single function: to pay out a specific lump sum amount in the event of your death within a specific period. This type of policy will only pay out if you pass away during the term of the policy.

• Whole life insurance - Also called permanent insurance, this type of life insurance pays out a death benefit whenever you die – regardless of when you die. There are three main types of whole life insurance:
  • Traditional whole life
  • Universal life
  • Variable universal life

Understanding Health Insurance

With the escalating cost of health care, the need to obtain health insurance coverage becomes ever more critical to your financial security. This coverage pays for medical costs resulting from an accident or illness. These costs include prescriptions, doctor visits, hospitalization, surgery, in-home care and rehabilitation.

The United States health care system provides a range of different health insurance options. Health insurance coverage is provided through employer-provided group health plans, government-sponsored health plans such as Medicare, and private insurance health plans that are purchased by individuals and small business owners.

Types of Health Insurance

There are different types of health insurance policies available to suit individual needs and budgets. Most health plans fall into five main categories.

• Fee-for-Service health plans
• HMO (Health Maintenance Organization)
• PPO (Preferred Provider Organization)
• POS (Point of Service)
• EPO (Exclusive Provider Organization)

Understanding the options available is important to choosing health insurance protection that offers the coverage you need at a price you can afford. The choice of health insurance for an individual or family should be best suited to their specific health needs and budgets. Keep in mind, that there are differences between health insurance plans within the same category, so be sure to read all the materials that are provided when you obtain health insurance.

Knowledge is Power

Whether you're new to insurance or re-evaluating your current insurance coverage, it is smart to be informed. If you understand life and health insurance, this knowledge empowers you to make an informed decision regarding the type of coverage you should purchase to fit your needs and budget.