How Health Insurance Works
Health insurance can be tricky to navigate. Managed care insurance plans require policyholders to receive care from a network of designated healthcare providers for the highest level of coverage. If patients seek care outside the network, they must pay a higher percentage of the cost. In some cases, the insurance company may even refuse payment outright for services obtained out of network.
Many managed care plans—for example, health maintenance organizations (HMOs) and point-of-service plans (POS)—require patients to choose a primary care physician who oversees the patient's care, makes recommendations about treatment, and provides referrals for medical specialists. Preferred-provider organizations (PPOs), by contrast, don't require referrals but do have lower rates for using in-network practitioners and services.
Insurance companies may also deny coverage for certain services that were obtained without preauthorization. In addition, insurers may refuse payment for name-brand drugs if a generic version or comparable medication is available at a lower cost. All these rules should be stated in the material provided by the insurance company and should be carefully reviewed. It's worth checking with employers or the company directly before incurring a major expense.
Increasingly, health insurance plans also have copays, which are set fees that plan subscribers must pay for services such as doctor visits and prescription drugs; deductibles that must be met before health insurance will cover or pay for a claim; and coinsurance, a percentage of healthcare costs that the insured must pay even after they've met their deductible (and before they reach their out-of-pocket maximum for a given period).
Insurance plans with higher out-of-pocket costs generally have smaller monthly premiums than plans with low deductibles. When shopping for plans, individuals must weigh the benefits of lower monthly costs against the potential risk of large out-of-pocket expenses in the case of a major illness or accident.
Many managed care plans—for example, health maintenance organizations (HMOs) and point-of-service plans (POS)—require patients to choose a primary care physician who oversees the patient's care, makes recommendations about treatment, and provides referrals for medical specialists. Preferred-provider organizations (PPOs), by contrast, don't require referrals but do have lower rates for using in-network practitioners and services.
Insurance companies may also deny coverage for certain services that were obtained without preauthorization. In addition, insurers may refuse payment for name-brand drugs if a generic version or comparable medication is available at a lower cost. All these rules should be stated in the material provided by the insurance company and should be carefully reviewed. It's worth checking with employers or the company directly before incurring a major expense.
Increasingly, health insurance plans also have copays, which are set fees that plan subscribers must pay for services such as doctor visits and prescription drugs; deductibles that must be met before health insurance will cover or pay for a claim; and coinsurance, a percentage of healthcare costs that the insured must pay even after they've met their deductible (and before they reach their out-of-pocket maximum for a given period).
Insurance plans with higher out-of-pocket costs generally have smaller monthly premiums than plans with low deductibles. When shopping for plans, individuals must weigh the benefits of lower monthly costs against the potential risk of large out-of-pocket expenses in the case of a major illness or accident.
What Is Health Insurance?
Health insurance is a contract that requires an insurer to pay some or all of a person's healthcare costs in exchange for a premium. More specifically, health insurance typically pays for medical, surgical, prescription drug, and sometimes dental expenses incurred by the insured. Health insurance can reimburse the insured for expenses incurred from illness or injury, or pay the care provider directly.
It is often included in employer benefit packages as a means of enticing quality employees, with premiums partially covered by the employer but often also deducted from employee paychecks. The cost of health insurance premiums is deductible to the payer, and the benefits received are tax-free, with certain exceptions for S corporation employees.
KEY TAKEAWAYS
- Health insurance is a type of insurance coverage that pays for medical and surgical expenses incurred by the insured.
- Choosing a health insurance plan can be tricky because of plan rules regarding in- and out-of-network services, deductibles, copays, and more.
- Since 2010, the Affordable Care Act has prohibited insurance companies from denying coverage to patients with preexisting conditions and has allowed children to remain on their parents' insurance plan until they reach the age of 26.
- Medicare and the Children's Health Insurance Program (CHIP) are two public health insurance plans that target older individuals and children, respectively. Medicare also serves people with certain disabilities.
What's not covered under home insurance?
While coverage varies from policy to policy, it’s hard to determine the exact extent of what may not be covered. With TD Insurance, our home insurance offerings all follow comprehensive form/all risk coverage, meaning that all risks are covered, with the exception of specific properties and exclusions outlined in your policy. Regardless of who your insurer is, check your policy carefully to understand these exclusions. Should you find something you'd like/need coverage for that's listed as an exclusion on your policy, you can always check to see whether there is an option to buy additional coverage for it through an add-on. If in doubt, talk to your insurance provider to get the information you need.
Keep in mind that some exclusions are outright, meaning that there are no options to add on coverage to include them in your policy. In these cases, you would be responsible for covering these losses yourself. These exclusions are common to most insurance companies and typically include wear and tear, damage caused by pests (such as rodents or insects) and acts of terrorism, to name a few.
Your policy is also likely to contain specific dollar limits and possible coverage restrictions on certain categories of items, such as jewellery or wine collections. If you have belongings of particularly high-value, you should check these limits and restrictions to ensure you're properly covered. Should you need additional coverage, check out our Personal Valuables Coverage to learn more.
What does home insurance cover?
Home insurance covers expenses that occur when something unexpected or accidental happens to your home and/or your belongings. That means that you'll receive financial protection against losses due to theft, fire, wind damage and much more. Should anything happen to your home, your standard policy can include coverage for the structure of your home, coverage for your personal belongings, and coverage for additional living expenses (if you're unable to live in your home while it's being repaired due to a covered loss). Home insurance also covers more than just your home. It can also come to the rescue if someone injures themselves on your property, or if you damage someone else's property or accidentally injure someone. This is where your liability protection will kick in which is also typically included in a standard policy.
Let’s take a look at a couple of examples of what you’re generally covered for. Let's say you become a victim to theft and some of your big-ticket personal belongings are stolen. Depending on how your policy is set up, your home insurance will provide you with coverage based on either the Replacement Cost or the Actual Cash Value of your stolen items (subject to your deductible, of course). Or, let's say you experience a loss due to fire — your home insurance will cover the repair, the reconstruction or the replacement of your home, depending on the extent of the damages and your coverage limits.
What is Home Insurance?
Owning a home may be your biggest investment, so how can you protect it? Well, home insurance is a form of property insurance that you can purchase to protect your property and your belongings.
It may not be something we think about every day, but unexpected incidents can happen at any time to your home, which is why home insurance is important to have. But home insurance wasn’t always an option for people. Did you know that home insurance originated from something called "fire insurance?" As the name suggests, fire insurance was used to cover fires, but has since evolved to "home insurance" since it now covers more than just that. Like what, you may ask? Well, let's talk about it. We have answers to some questions you may be wondering about.Do I need home Insurance?
Before we get into the nitty gritty of all your home insurance questions, let's start off by saying we strongly recommend that you have home insurance, simply for all the value it offers — even if home insurance isn't mandated by law the same way that car insurance is. Keep in mind that if you're looking to purchase a home, or if you're a homeowner that has applied for a mortgage, your lender will likely require you to purchase home insurance first anyways. Having home insurance can protect you from having to pay a large lump sum to repair damages to your property and personal belongings if something happens to or in your home. So, although home insurance isn’t necessarily a requirement, it definitely plays a crucial role in protecting what may be your greatest asset.
Travel Insurance Defined
Travel insurance is a type of insurance that covers the costs and losses associated with traveling. It is useful protection for those traveling domestically or abroad.
According to a 2021 survey by insurance company Battleface, almost half of Americans have faced fees or had to absorb the cost of losses when traveling without travel insurance.Thirty-six percent of Americans say they're more likely to purchase travel insurance for trips abroad following the COVID-19 pandemic while 34% said they're more likely to do so for domestic trips.
According to a 2021 survey by insurance company Battleface, almost half of Americans have faced fees or had to absorb the cost of losses when traveling without travel insurance.Thirty-six percent of Americans say they're more likely to purchase travel insurance for trips abroad following the COVID-19 pandemic while 34% said they're more likely to do so for domestic trips.
KEY TAKEAWAYS
- Many companies selling travel packages also offer travel insurance.
- Some travel policies cover damage to personal property, rented equipment, such as rental cars, and even ransom requests.
- The main categories of travel insurance include trip cancellation or interruption coverage, baggage and personal effects coverage, medical coverage, and accidental death or flight accident coverage.
- Coverage often includes 24/7 emergency services, such as replacing lost passports, cash wire assistance, and re-booking canceled flights.
Term vs. Permanent Life Insurance
Term life insurance differs from permanent life insurance in several ways but tends to best meet the needs of most people. Term life insurance only lasts for a set period of time and pays a death benefit should the policyholder die before the term has expired. Permanent life insurance stays in effect as long as the policyholder pays the premium. Another critical difference involves premiums—term life is generally much less expensive than permanent life because it does not involve building a cash value.
Before you apply for life insurance, you should analyze your financial situation and determine how much money would be required to maintain your beneficiaries’ standard of living or meet the need for which you’re purchasing a policy.
For example, if you are the primary caretaker and have children 2 and 4 years old, you would want enough insurance to cover your custodial responsibilities until your children are grown up and able to support themselves.
You might research the cost of hiring a nanny and a housekeeper or using commercial child care and cleaning services, then perhaps add some money for education. Include any outstanding mortgage and retirement needs for your spouse in your life insurance calculation. Especially if the spouse earns significantly less or is a stay-at-home parent. Add up what these costs would be over the next 16 or so years, add more for inflation, and that’s the death benefit you might want to buy—if you can afford it.
Before you apply for life insurance, you should analyze your financial situation and determine how much money would be required to maintain your beneficiaries’ standard of living or meet the need for which you’re purchasing a policy.
For example, if you are the primary caretaker and have children 2 and 4 years old, you would want enough insurance to cover your custodial responsibilities until your children are grown up and able to support themselves.
You might research the cost of hiring a nanny and a housekeeper or using commercial child care and cleaning services, then perhaps add some money for education. Include any outstanding mortgage and retirement needs for your spouse in your life insurance calculation. Especially if the spouse earns significantly less or is a stay-at-home parent. Add up what these costs would be over the next 16 or so years, add more for inflation, and that’s the death benefit you might want to buy—if you can afford it.
Types of Life Insurance
Many different types of life insurance are available to meet all sorts of needs and preferences. Depending on the short- or long-term needs of the person to be insured, the major choice of whether to select temporary or permanent life insurance is important to consider.
Term life insurance
Term life insurance lasts a certain number of years, then ends. You choose the term when you take out the policy. Common terms are 10, 20, or 30 years. The best term life insurance policies balance affordability with long-term financial strength.- Decreasing term life insurance is renewable term life insurance with coverage decreasing over the life of the policy at a predetermined rate.
- Convertible term life insurance allows policyholders to convert a term policy to permanent insurance.
- Renewable term life insurance provides a quote for the year the policy is purchased. Premiums increase annually and are usually the least expensive term insurance in the beginning.
Permanent Life Insurance
Permanent life insurance stays in force for the insured’s entire life unless the policyholder stops paying the premiums or surrenders the policy. It’s typically more expensive than term.- Whole life insurance is a type of permanent life insurance that accumulates cash value. Cash-value life insurance allows the policyholder to use the cash value for many purposes, such as a source of loans or cash or to pay policy premiums.
- Universal Life (UL) is a type of permanent life insurance with a cash value component that earns interest. Universal life features flexible premiums. Unlike term and whole life, the premiums can be adjusted over time and designed with a level death benefit or an increasing death benefit.
- Indexed universal (IUL) is a type of universal life insurance that lets the policyholder earn a fixed or equity-indexed rate of return on the cash value component.
- Variable universal life insurance allows the policyholder to invest the policy’s cash value in an available separate account. It also has flexible premiums and can be designed with a level death benefit or an increasing death benefit.
What Is Life Insurance?
Life insurance is a contract between an insurer and a policy owner. A life insurance policy guarantees the insurer pays a sum of money to named beneficiaries when the insured dies in exchange for the premiums paid by the policyholder during their lifetime.
The life insurance application must accurately disclose the insured’s past and current health conditions and high-risk activities to enforce the contract.
The life insurance application must accurately disclose the insured’s past and current health conditions and high-risk activities to enforce the contract.
KEY TAKEAWAYS
- Life insurance is a legally binding contract that pays a death benefit to the policy owner when the insured dies.
- For a life insurance policy to remain in force, the policyholder must pay a single premium upfront or pay regular premiums over time.
- When the insured dies, the policy’s named beneficiaries will receive the policy’s face value, or death benefit.
- Term life insurance policies expire after a certain number of years. Permanent life insurance policies remain active until the insured dies, stops paying premiums, or surrenders the policy.
- A life insurance policy is only as good as the financial strength of the company that issues it. State guaranty funds may pay claims if the issuer can’t.
Types of Insurance
There are many different types of insurance. Let’s look at the most important.
Health Insurance
With regard to health insurance, people who have chronic health issues or need regular medical attention should look for policies with lower deductibles. Though the annual premium is higher than a comparable policy with a higher deductible, less expensive access to medical care throughout the year may be worth the tradeoff.Home Insurance
Homeowners insurance (also known as home insurance) protects your home and possessions against damage or theft. Virtually all mortgage companies require borrowers to have insurance coverage for the full or fair value of a property (usually the purchase price) and won’t make a loan or finance a residential real estate transaction without proof of it.Auto Insurance
When you buy or lease a car, it’s important to protect that investment. Getting auto insurance can offer reassurance in case you’re involved in an accident or the vehicle is stolen, vandalized, or damaged by a natural disaster. Instead of paying out of pocket for auto accidents, people pay annual premiums to an auto insurance company; the company then pays all or most of the costs associated with an auto accident or other vehicle damage.Life Insurance
Life insurance is a contract between an insurer and a policy owner. A life insurance policy guarantees that the insurer pays a sum of money to named beneficiaries when the insured dies in exchange for the premiums paid by the policyholder during their lifetime.Travel Insurance
Travel insurance is a type of insurance that covers the costs and losses associated with traveling. It is useful protection for those traveling domestically or abroad. According to a 2021 survey by insurance company Battleface, almost half of Americans have faced fees or had to absorb the cost of losses when traveling without travel insurance.How Insurance Works
A multitude of different types of insurance policies is available, and virtually any individual or business can find an insurance company willing to insure them—for a price. The most common types of personal insurance policies are auto, health, homeowners, and life. Most individuals in the United States have at least one of these types of insurance, and car insurance is required by law.
Businesses require special types of insurance policies that insure against specific types of risks faced by a particular business. For example, a fast-food restaurant needs a policy that covers damage or injury that occurs as a result of cooking with a deep fryer. An auto dealer is not subject to this type of risk but does require coverage for damage or injury that could occur during test drives.
There are also insurance policies available for very specific needs, such as kidnap and ransom (K&R), medical malpractice, and professional liability insurance, also known as errors and omissions insurance.
Businesses require special types of insurance policies that insure against specific types of risks faced by a particular business. For example, a fast-food restaurant needs a policy that covers damage or injury that occurs as a result of cooking with a deep fryer. An auto dealer is not subject to this type of risk but does require coverage for damage or injury that could occur during test drives.
There are also insurance policies available for very specific needs, such as kidnap and ransom (K&R), medical malpractice, and professional liability insurance, also known as errors and omissions insurance.
What Is Insurance?
Most people have some kind of insurance: for their car, their house, or even their life. Yet most of us don’t stop to think too much about what insurance is or how it works.
Put simply, insurance is a contract, represented by a policy, in which a policyholder receives financial protection or reimbursement against losses from an insurance company. The company pools clients’ risks to make payments more affordable for the insured.
Insurance policies are used to hedge against the risk of financial losses, both big and small, that may result from damage to the insured or their property, or from liability for damage or injury caused to a third party.
KEY TAKEAWAYS
- Insurance is a contract (policy) in which an insurer indemnifies another against losses from specific contingencies or perils.
- There are many types of insurance policies. Life, health, homeowners, and auto are the most common forms of insurance.
- The core components that make up most insurance policies are the deductible, policy limit, and premium.