Insurance 101

What is it?

At its core, health insurance is an agreement between you and a health insurance provider, stating that the provider will pay all or some of any qualifying medical expenses you incur.

Matt Brown, life and health insurance agent with the Tulsa-based office of Rich & Cartmill, Inc., explains the essence of health insurance in simple terms.

“I think health insurance is protection for that, ‘what if’ day,” he says. “To be there for the worst case scenario, if it were to happen, [and] to protect you from medical bankruptcy, is the ultimate goal.”

And, unfortunately, the risk of financial problems due to an injury or illness is a real possibility. According to the American Public Health Association, medical bills are one of the most frequent causes of financial hardship in America.

Brown stresses that it is important not to assume you can’t afford health insurance without getting all the information.

“More and more people are qualifying for a tax credit through healthcare.gov,” says Brown. “So when they think they can’t afford it, they actually can. There’s situations or circumstances that are in place, that maybe … their adjusted gross income actually qualifies them for some monthly savings that they can use for the cost of their insurance. So they don’t have to go without. It’s worth the investigation to see that, based off [their] family size and [their] family income, they’re going to qualify.” 

How do I get it? 

In most cases, the best way to obtain individual or family health insurance is through an employer group plan. So check with your place of employment first to determine if it provides health insurance as an employment benefit. If health insurance is not a benefit offered by your employer or you are unemployed, you’ll need to look a little further.

Brown recommends shopping for health insurance through the federal health insurance marketplace,
healthcare.gov. Here, shoppers can check out the healthcare insurance options available in their county. This is where you can find information regarding whether or not you are eligible for a federally funded subsidy to help you pay for your coverage as well, says Brown.

“A subsidy helps them … pay for a portion of their premium if they qualify, based off of their household size and household income,” says Brown.

There is a third option for obtaining health insurance by contacting insurance companies directly or working with a health insurance agent or broker.

What should I know about enrollment?

At the end of each year, it’s important to re-examine your health insurance plan. Make sure that it’s still serving your needs, and determine if any changes need to be made. Because, typically, you can only make these changes during a specific time of the year – the enrollment period, or open enrollment.

Be sure to watch for information about the enrollment period if you’re using your employer-offered health insurance. There will be a window of time, typically in November or December each year, when you will be asked to enroll for your employer’s health insurance plan for the next calendar year. This is the time to make any changes to that plan for the next year.

The federal health insurance marketplace operates on a similar time table. Those deadlines are typically from Nov. 1 through Dec. 15, says Brown, but be sure to verify those dates in your state.

There are some situations that occur that cause an exception to this rule. These are called qualifying events and include things like marriage, birth of a child, a move to a new area or the loss or change of a job. These events allow individuals to gain or change their coverage at any time during the year, says Brown.

Term glossary

When dealing with health insurance, you may run across some terms that are unfamiliar. Premium is one of the first terms you’ll see, and it is simply the amount you pay, typically monthly, to participate in a certain healthcare plan. If you are getting your health insurance through your employer, this may be automatically deducted from your paycheck.

Another term you may hear in relation to health insurance is deductible, says Brown. He explains that a deductible is a dollar amount that you are 100% responsible for paying before insurance begins to pay. This amount varies from plan to plan, and can be tied to a higher or lower premium, so it is important to know your deductible.

Next you will want to know what the term coinsurance means. Brown describes this as the percentage split between you – the member – and the insurance company itself. So, after you’ve paid your deductible, if you have one, then your insurance pays a certain percentage of healthcare costs and you pay the remaining percentage. This is typically around 80% for insurance and 20% for the member, according to Brown.

After the deductible and coinsurance comes the out-of-pocket maximum. This is the total amount you would have to pay in a year. So no matter how large your medical bills are, that out-of-pocket maximum number is your total exposure for the year, says Brown. All co-pays, which are set amounts you pay for basic services, prescriptions and your percentage of coinsurance, count toward this out-of-pocket maximum.

Now let’s discuss a different, but no less important, type of insurance – life.

What is it?

Much like health insurance, life insurance is a contract between an insurance policy holder and an insurer or assurer, where the insurer agrees to pay a designated beneficiary a sum of money upon the death of the insured person.

Susan Weed, the chief sales officer for American Fidelity Assurance in OKC, says that “life insurance allows us to plan, prepare for and financially protect our families and other loved ones when we die.”

What types of life insurance exist?

There are a few different types of life insurance that you may want to consider, but it’s important to have some form of life insurance to provide for those you love in the case of death. According to Forbes.com, 44% percent of U.S. households would face financial hardship within six months if the primary wage earner died; and for 28%, it would be just one month.

Weed explains that there are three main types of life insurance: term, whole and universal.

Term life insurance can be the most affordable, but is only guaranteed for a set number of years – typically 15, 20 or 30. Weed says this type of life insurance can be useful “to cover your working years in case you pass away before paying off your home. Or to provide for your family during the years, when you have young children [and] they are most dependent on you financially.”

Whole life insurance typically has more costly premiums, but those premiums and the face amount will not change for the rest of your life. 

“You have an idea of the amount of money that you want to leave, so that any outstanding and final expenses are covered, as well as an additional amount to help those who you are leaving behind,” says Weed.

Universal life insurance is a blending of the other two offerings, and all of these options should be discussed with a professional to determine which type or types are correct for different situations.  

When it comes to life insurance, it is an important topic to ponder and discuss with loved ones. But Weed emphasizes the need to not overanalyze the choices and make a decision to protect your family.

“Most people do not have enough life insurance,” she says. “But the most important concept that I wish everyone could remember is [that] the best policy is the one you have in place when you die. Even a small amount of coverage is better than nothing.”