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:

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an accident

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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:

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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:

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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.