Individuals handle risks in three ways: Prepare to bear the costs themselves Use safety and avoidance measures to try to avoid costly incidents Transfer risks to another party by purchasing insurance policies Insurance is a risk-management technique, an arrangement in which an insured pays money to an insurer to gain protection against risks and compensation for losses. Health insurance Types of coverage Medical benefits---pay a large part of hospital and surgical care, may also pay part of some other medical expenses (e.g., doctor s visits) Major medical---pays for long-term illness expenses after basic medical benefits limits have been reached (e.g., cancer). Dental insurance---covers all/part of routine services (e.g., examination cleaning, X- rays) and some other procedures Vision benefits---may cover all or part of eye examinations, glasses, and contact lens Disability insurance---supplies all/part of a worker s pay if unable to work due to illness or injury; short-term vs. long-term; often a waiting period before payments begin Long-term care insurance---intended to cover the costs of extended home nursing care and related expenses which are not covered by regular medical benefits Accident insurance---covers costs from injuries that occur at an eligible location and/or time. Large group rates keep costs low, but do not cover illness. Medigap insurance---private insurance available to citizens 65 and older who have Medicare A and B plans. Covers the cost of co-payments and deductibles Government programs Medicare---the federal government pays some of the medical expenses of the elderly, ages 65 and older, and for some people with disabilities; client can choose managed Medicare called Medicare Advantage or get fee-for service Medicaid---state and federal governments share the cost to pay certain medical bills for low-income persons Children s Hospital Insurance Programs (CHIP)---health insurance for children under eighteen whose parents earn too much to qualify for Medicaid, but not enough to buy private insurance. Federal funds are distributed by state programs to cover costs. COBRA---Consolidated Omnibus Budget Reconciliation Act gives the right to pay one s own premiums and continue employer-sponsored group health insurance plan for a limited time after leaving a job.
OBJECTIVE: 7.01 B2 5% Classify types of health and life insurance and features of types of coverage. UNPACKED CONTENT Life insurance Term insurance- provides insurance for a specific period of time Relatively low cost Policy benefits: young person can buy a large amount of coverage for minimum money No investment benefits Types Level term- premiums and death benefits stay the same for the life of the policy Decreasing term- premiums stay the same but the benefits decrease over the life of the policy e.g. for home mortgage Renewable term- the insured person can renew the policy without taking a physical Convertible term- the insured person can change the policy from convertible to permanent without taking a physical, tends to be more expensive Permanent life insurance (also called cash value life insurance) provides coverage the person s entire life and includes an investment component Whole-life insurance- provides insurance for whole lifetime as long as premiums are paid More expensive than term insurance because one pays for premium plus an investment Policy benefits---insurance coverage for a lifetime as long as all premiums are paid Investment benefits---grows in cash value as premiums and interest accumulate; one can borrow against it at low interest rate and receive some/all of cash value if change policies Types Limited-payment life-- coverage for entire life but premiums are higher than whole life because premiums are paid for a set number of years or until a set age Universal life--- allows adjustments of premium, face value, and level of protection Variable life---premiums are fixed, but face amount varies with investment results Things that affect the cost of life insurance Family health history Pre-existing conditions The policyholder s current health The policyholder s occupation and hobbies (e.g. race car driver) Gender (women live longer than men and pay lower premiums) Age of insured (the older the insured, the more the premiums cost) Things (risks) to consider when selecting the amount of insurance coverage: Present and future earnings of the policyholder Financial responsibilities of the policyholder Potential income from other sources Dependents, their ages and their needs Burial expenses Debts
Key Terms Worksheet: Health and Life Insurance Term Explanation General Insurance Terms risk insurance policy policyholder coverage premium deductible Health Insurance health insurance basic medical major medical HMO HAS PPO POS fee-for-services plan CHIP Uncertain, factors that can lead to or An arrangement in which an pays money to an to gain protection against and compensation for A written stating the arrangement between insured and A consumer who has an insurance policy Potential risks and losses against which an insured is by a policy A fee an insurance company on a regular basis for coverage An amount paid by an insured for a loss insurance begin Provides compensation for financial losses due to,, or disability pay a large part of hospital and care, may also pay part of some other expenses (e.g., doctor s visits) pays for - illness expenses after basic medical benefits have been reached (e.g., cancer). Health organization-- a health care group that provides health care services to members for a set fee and a small Health Account---You contribute - dollars to the account for medical expenses for the coming year often set up through your employer-submit claims and receipts for reimbursement up to amount Preferred organization---an agreement between health providers with employers or insurers to provide services at a rate to Point of ---members use a primary who refers them as needed to participating specialists or members can see non-participating specialist members. But, members pay for to use non-participating health providers. A plan in which an insured can select his/her own and, pay costs at time of, and file form with insurance company for of covered expenses Children s Insurance
Disability Appendix 7.01C, continued An illness or injury that leaves a person to Key Terms Worksheet: Health and Life Insurance Health Insurance, continued long term care worker s compensation Medigap Insurance COBRA co-payment pre-existing condition renewability maximum benefit open enrollment period exclusion preauthorization primary care physician Pays for care when a person with a or injury cannot care for themselves for an period of time are require to have in every state in some form. Covers medical care, treatment, rehabilitation, and a of from injuries that occur in the May be purchased by Medicare recipients to cover part/all not covered by A law that someone who leaves may be eligible to keep insurance coverage at his/her own up to months The amount of a claim up to a stated that the insured must An or that a person has at the time he/she enrolls in a plan A patient s to restart coverage annually A limit on the number of one s care will be covered, or the amount that can be paid in benefits for a specific procedure A period during which a person can in a health care plan A medical service that is not Requirement to obtain from the plan before having certain or procedures done A doctor who provides general care and coordinates other health care Life Insurance beneficiary insurance benefits face value maturity cash value term insurance whole life insurance A group or individual selected to receive the of a person when he/she Assets or by having an insurance policy The amount of money payable to a as a benefit when an insured The length of it takes an insurance policy to reach its full The amount of money a whole life policyholder would receive if the policy were before death or A type of insurance that provides coverage for a specific of time with no benefits A type of insurance that provides coverage for a whole lifetime and grows in value as premiums and accumulate