Buying a health insurance policy is as is an important step in life that requires to be handled with the seriousness it deserves. First, you must ask what is medical insurance and what are the building components of the various policies.
Once you understand this, you will avoid purchasing policies that will frustrate you in the future. Some people pay expensive policies that are not effective just because they ignored important details before buying these policies. To avoid falling for the same trap, this article highlight important components of a medical insurance cover;
What is a health insurance policy?
A medical insurance policy is termed as a legal agreement between a health insurance company and the policy owner which is (you) the buyer. The term of this type of contract is usually limited therefore the policyholder ought to make monthly payments commonly referred to as premiums to keep the coverage active. The agreement dictates the roles of an insurance company which is to take of medical costs and in some cases that of their family members.
Here are the main components or elements of a medical insurance policy;
- Insurance premium
A medical insurance premium is a monthly fee a policyholder pay to keep the coverage active. Premiums vary from one provider to the others. The premium amount is determined based on such factors as medical history, age, and gender. An underwriting procedure is used to determine your risk category. The underwriting procedure is quite important in that it prevents possible “adverse selection”
Every medical insurance policy requires the policyholder to cater to a certain amount in case of risk occurrence beforehand. There is, of course, a settled –upon the amount which you will have to pay before the insurance company comes in to take over from there. This initial fee is known as a deductible.
Besides the deductible, every policyholder is supposed to settle a certain portion of every covered health treatment. This fee is known as copays and is meant to block out policyholders who may have the intention of misusing medical services. Again copays amount differ from one insurance company to the other. However, insurance companies with higher copays reduce the visibility to the masses since people go for insurance policies that are pocket-friendly =.
To reduce excessive utilization and to enhance sharing of risks, insurers ensure that care of at least 80% of the medical cost but this after all deductions are made which include copays and deductibles.
Having a medical insurance plan does not mean that all your medical expenses will be covered. The list of expenses that are not covered is usually defined depending on the medical condition. For instance, various health insurers do not cater to non-compulsory cosmetic surgery like tummy tucks, facelifts, and bariatric surgery not unless on very rare occasions.
- Coverage limits
Most insurance companies must set a limit on the amount of money they can provide to settle a medical bill. The set limits range from $500000-$1000000 on an annual basis, lifetime or even both.