The term health insurance is generally used to describe a form of insurance that pays for medical expenses. It is sometimes used more broadly to include insurance covering disability or long term nursing or custodial care needs. It may be provided through a government-sponsored social insurance program, or from private insurance companies. It may be purchased on a group basis (e.g., by a firm to cover its employees) or purchased by individual consumers. In each case, the covered groups or individuals pay premiums or taxes to help protect themselves from high or unexpected healthcare expenses. Similar benefits paying for medical expenses may also be provided through social welfare programs funded by the government.

Health insurance works by estimating the overall risk of healthcare expenses and developing a routine finance structure (such as a monthly premium or annual tax) that will ensure that money is available to pay for the healthcare benefits specified in the insurance agreement. The benefit is administered by a central organization, most often either a government agency or a private or not-for-profit entity operating a health plan.

History of health insurance
The concept of health insurance was proposed in 1694 by Hugh the Elder Chamberlen from the Peter Chamberlen family. In the late 19th century, "accident insurance" began to be available, which operated much like modern disability insurance..This payment model continued until the start of the 20th century in some jurisdictions (like California), where all laws regulating health insurance actually referred to disability insurance.

Accident insurance was first offered in the United States by the Franklin Health Assurance Company of Massachusetts. This firm, founded in 1850, offered insurance against injuries arising from railroad and steamboat accidents. Sixty organizations were offering accident insurance in the US by 1866, but the industry consolidated rapidly soon thereafter. While there were earlier experiments, the origins of sickness coverage in the US effectively date from 1890. The first employer-sponsored group disability policy was issued in 1911.

Before the development of medical expense insurance, patients were expected to pay all other health care costs out of their own pockets, under what is known as the fee-for-service business model. During the middle to late 20th century, traditional disability insurance evolved into modern health insurance programs. Today, most comprehensive private health insurance programs cover the cost of routine, preventive, and emergency health care procedures, and also most prescription drugs, but this was not always the case.

Hospital and medical expense policies were introduced during the first half of the 20th century. During the 1920s, individual hospitals began offering services to individuals on a pre-paid basis, eventually leading to the development of Blue Cross organizations. The predecessors of today's Health Maintenance Organizations (HMOs) originated beginning in 1929, through the 1930s and on during World War II.

SEE HOW HEALTH INSURANCE WORKS

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CPS Health Insurance Definitions

The Census Bureau broadly classifies health insurance coverage as either Private (non-government) coverage or Government-sponsored coverage.

Private Health Insurance

Private health insurance is coverage by a health plan provided through an employer or union or purchased by an individual from a private health insurance company.

Employment-based plans
Employment-based health insurance is coverage offered through one’s own employment or a relative’s. It may be offered by an employer or by a union.

Own Employment-based plans
Own employment-based health insurance is coverage offered through one’s own employment and only the policyholder is covered by the plan.

Direct-purchase plans
Direct-purchase health insurance is coverage though a plan purchased by an individual from a private company.

Government Health Insurance

Government health insurance includes plans funded by governments as the federal, state, or local level. The major categories of government health insurance are medicare, medicaid, the State Children’s Health Insurance Program (SCHIP), military health care, state plans, and the Indian Health Service.

Medicare
Medicare is the Federal program which helps pay health care costs for people 65 and older and for certain people under 65 with long-term disabilities.

Medicaid
Medicaid is a program administered at the state level, which provides medical assistance to the needy. Families with dependent children, the aged, blind, and disabled who are in financial need are eligible for Medicaid. It may be known by different names in different states.

SCHIP
SCHIP, the State Children’s Health Insurance Program, is a program administered at the state level, providing health care to low-income children whose parents do not qualify for Medicaid. SCHIP may be known by different names in different states.

Military health care
Military health care includes TRICARE/CHAMPUS (Civilian Health and Medical Program of the Uniformed Services) and CHAMPVA (Civilian Health and Medical Program of the Department of Veterans Affairs), as well as care provided by the Department of Veterans Affairs (VA).

TRICARE/CHAMPUS
TRICARE or CHAMPUS is a military health care program for active duty and retired members of the uniformed services, their families, and survivors.

CHAMPVA
CHAMPVA is a medical program through which the Department of Veterans Affairs helps pay the cost of medical services for eligible veterans, veteran's dependents, and survivors of veterans.

VA
The Department of Veterans Affairs provides medical assistance to eligible veterans of the Armed Forces.

State-specific plan
Some states have their own health insurance programs for low-income uninsured individuals. These health plans may be known by different names in different states.

Indian Health Service*
Indian Health Service (IHS) is a health care program through which the Department of Health and Human Services provides medical assistance to eligible American Indians at IHS facilities. In addition, the IHS helps pay the cost of selected health care services provided at non-IHS facilities.

*After consulting with health insurance experts, the Census Bureau modified the definition of the population without health insurance in the Supplement to the March 1998 Current Population Survey, which collected data about coverage in 1997. Previously, people with no coverage other than access to the Indian Health Service were counted as part of the insured population. Subsequently, the Census Bureau has counted these people as uninsured. The effect of this change on the overall estimates of health insurance coverage was negligible.

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Holidays can be dangerous occasions - especially abroad. If someone falls ill it is much more difficult than it would be at home to cope with the situation, so make sure you're covered.

Holiday insurance or travel insurance as it might be known can be bought as a complete package or selectively. Package policies usually include

Cancellation

Protects against the loss of deposits, advance payments, and other charges if a holiday has to be cancelled. The cancellation may be due to death, injury or illness of the traveller or a close relative, business associate, or other member of the party. It may be because of jury service or witness summons. Cancellation cover does not, however, extend to previously existing medical conditions or pregnancy. Some policies also pay compensation if departure is delayed by industrial action or if the holiday has to be curtailed.

Medical Expenses

Even in the EU, where there are special arrangements for British people to have free or cheap medical treatment, it is sensible to take out separate insurance. This not only covers the cost of treatment but also extra travel, accommodation costs, and air ambulances home if necessary. Cover is often for £1 million or more.

Personal Accident

Pays compensation if the policyholder is accidentally injured.

Personal Liability

Pays for any damages the policyholder may incur to another person.

Baggage and Money

Pays for up to £1,000 or more of baggage, with 250 pounds or so for lost money.

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Most people know something about motor insurance. This is because any vehicle driven on public roads must have a certain level of insurance.

This article covers auto insurance or car insurance as it might be known.

The Road Traffic Act ensures that drivers must meet liabilities they incur should they injure other people or cause damage in an accident.

The person who is injured is known as the third party. The first and second parties are the car driver and their insurance company respectively. The third party may be a pedestrian, a passenger in the car driven by the insured person, or the driver or passenger in another vehicle.

The injured third party can claim compensation from the driver of the offending car. The driver then relies on his or her insurers to pay the other person's claim.

Different Types of Motor Policy

The law says that drivers must have insurance against third party injury or damage claims and that the insurer must give to the insured a certificate of motor insurance. However, most motor insurance policies provide far more extensive cover than this. There are four basic types of cover available in Britain:

• Act only - This brings only the minimum required by law - third party liability risks incurred on public roads. Policies of this type are very rarely issued. Few motorists would be content to rely on them unless, because of a poor driving record, they could not obtain any other cover.
• Third party - As well as covering the insured when driving on public roads, this type of policy applies on private property. It covers third party claims and provides protection against other legal liabilities. For example passenger indemnity, covering the possibility that a passenger in the car may cause an accident perhaps by carelessly opening the door and knocking a cyclist over. It also provides cover against certain legal costs.
• Third party fire and theft - In addition to the protection given by third party insurance, this type of policy covers loss or damage to the insurer's own car as a result of fire, theft, or attempted theft.
• Comprehensive - The widest form of cover available, although it cannot protect against every conceivable risk. In addition to the covers described in 1, 2 and 3, comprehensive cover protects in other valuable ways. The most important of these is accidental damage cover -policyholders can have their own damaged vehicle repaired or replaced. Comprehensive policies also include personal accident insurance, providing payments for death and specified serious injuries such as the loss of a limb or sight. Such payments are usually restricted to the policyholder and his or her wife or husband. Other cover with a comprehensive policy can include small amounts of medical expenses cover for anyone in the insured car, who is injured in an accident, and for loss or damage to personal effects in the car.

Different Types of Vehicles

Insurers draw on their statistics and on their experience to issue special policies for various types of vehicle on the roads. There are, for example, private cars, and motorcycles including motor scooters and mopeds. Commercial vehicle insurance covers all vehicles used for transporting goods and passengers for commercial purposes, including hire cars and taxis. The insurance of agricultural and forestry vehicles and special types of vehicle covers a whole range of machines. Then there are vehicles constructed for specific purposes such as mobile cranes, earthmoving equipment and ambulances.

Motor Traders

Motor traders pose a different type of risk and therefore need specialised insurance policies. There are three basic types of motor trader policy.

"Road risks" covers the trader for any vehicles which they own or which are in their custody or control while they are away from the premises of the insured business. "Internal risks" covers them only for liabilities incurred on their own premises. "Combined road and garage" includes both these as well as other risks.

Insurers will only issue motor-trader policies to traders with their own premises. Traders working from home will have difficulty getting cover.

Calculation of Premiums

The cost of claims varies widely, depending on the risk involved. From their claims statistics motor insurers can relate premiums to the degree of risk. This gives fair treatment to all policyholders.

There are four main factors in calculating private car insurance premiums. These are:

• the type of car
• the drivers
• use to which the car will be put
• district in which it is kept

Type of Car

Cars are divided by insurers into 20 groups. The higher the group number, the higher the premium. The groups take account of factors such as the cost of body parts, the ease with which the car can be repaired, its value when new, its top speed, Its acceleration, and the degree to which h resist theft. Sports and high performance cars are more expensive to insure because statistics show that they are involved in more accidents and also that repairs are more costly than with other types of cars. They are therefore given a higher group rating than, for example, a small low-powered saloon.

Drivers

Information about drivers affects the premium significantly. Important factors include drivers' ages and their driving experience. Young drivers - particularly those under 25 - pay a higher premium because statistics show that they are far more often involved in accidents. Young men have more insurance claims than young women. This means that some insurers will charge young women lower premiums than men of the same age.

The premium may also be affected by drivers' occupations. Other factors include the accident record and history of convictions - drivers convicted of drunk-driving will, when they come back to driving, have to pay a very high premium for a policy providing only limited cover

Use

The use to which a car is put also affects the risk. Most insurers recognise three common classes;

• use for social domestic and pleasure purposes and use by the policy holder in person in connection with his business or that of his employer or partner
• use for social, domestic and pleasure purposes and for the business of the policyholder or that of his employer or partner
• all this cover, plus commercial travelling.

All of these types of cover exclude the use of the car for racing, competitions, and rallies or for carrying passengers for hire or reward. However, taking money from passengers in return for a lift (known as "car sharing") is allowed, as long as the lift is not part of a business arrangement.

District

The risk is also influenced by the district in which the car is kept. Areas with a high density of traffic are more risky than a remote country area. Also, some areas have a significantly higher-than-average record of car theft or vandalism. Insurers therefore divide the country up into a number of categories of area according to their experience of the risks involved. Sometimes, theft is not covered where a car is left overnight in the open.

No Claim Discount

Motorists who go for a year or more without making an insurance claim qualify for a no claim discount off the basic premium. Most insurers offer a reduction of around 25% after one claim-free year. This discount rises, year by year, to 60% or 65% after four or five years. If the motorist has to claim off his own policy he may lose some or all of his discount. The discount is allowed for not making a claim and the question of blame for any accident is not relevant. Therefore if motorists make a claim they will lose part of their discount (even if they are not to blame) unless their insurers can recover their claim payment from another motorist who is at fault.

Many insurers issue special policies which allow, say, two claims in three years without the no claim discount being affected. These "protected discount" policies of course cost more to buy.

The Excess

The excess is an arrangement whereby motorists meet the first part of a claim for accidental damage to the car or its theft. The amount of the excess is set out in the policy.

Excesses may be agreed by motorists on a voluntary basis to reduce the level of the premium or they may be imposed by the insurer. Compulsory excesses are often imposed, for example, on learner drivers or those who are young or inexperienced. A motorist with a poor claims record may also have to face a compulsory excess.

These excesses cut down the cost to insurers of small claims and therefore benefit all policyholders.

Motoring Abroad

All private motor policies issued in the UK extend automatically for use in all EU countries, and certain other European countries. The cover, however, is limited to third party liability.

To enjoy the full level of UK cover, such as fire, theft and accidental damage, motorists should tell their insurance company before departure. The company will then arrange to extend cover during the period of the visit.

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There are two basic types of household insurance; contents insurance and building insurance...

Contents insurance covers the contents of a home such as furniture, carpets, clothes, television, refrigerators, jewellery and so on. In other words, what you would take with you if you moved. Buildings insurance protects against damage to the actual structure of the home and to its fixtures and fittings. Contents and buildings policies can be bought separately or together in one package.

Contents Insurance

Everyone needs contents insurance, even if living in rented accommodation or sharing with friends. Tenants are responsible for their own property and they should make sure they have insurance against the risk of damage by fire, storm, or flood. There are of course other dangers which affect rented as well as owner-occupied homes, think of burglary for example. Unfortunately many people, particularly those living in rented property, ignore these dangers. About one in four households in Britain has no contents insurance at all.

Policies vary between insures. They give cover to the contents while they are inside the home and, in some cases, while they are outside in the immediate surroundings of the home. Most policies extend to give limited cover for contents which are temporarily away from the home. For example in the UK they may be at your place of work or at a holiday hotel.

Contents insurance covers damage from a very wide range of risks. These include fire; theft; escape of water from tanks or pipes; oil leaking from fixed heating systems; storm; flood; riot or malicious damage; explosion; lightning may impact by aircraft, vehicles or animals; falling trees; subsidence and earthquake. A contents policy also covers the loss of rent or the additional cost of alternative accommodation if the home is made uninhabitable. Contents cover includes accidental breakage of mirrors and glass in furniture and there is some cover for damage to rented property where the tenant is liable for this.

An important extension of contents insurance covers the legal liability of the occupier. Liability could arise if other people are injured or their property damaged as a result of the occupier's negligence. This is a little known but very important fringe benefit of household insurance. If, for example, a householder carelessly let a dog run free and caused a serious road accident, then the householder ... and not the car drivers ... could be legally liable and face an expensive bill for damages and legal fees. Many household policies also offer cover for any legal expenses to sue someone or if you are sued.

Buildings Insurance

Buildings insurance covers the structure of the house including fixtures and fittings, together with garages and outbuildings. There is limited cover for boundary walls, gates, paths, drives and swimming pools. In general, anything that would be left behind if the occupier moved is included in buildings insurance. If you're renting, buildings insurance is paid by the landlord, not you.

The policy should cover damage caused by fire, explosion, lightning, earthquake, the impact of aircraft vehicles or animals, theft or attempted theft, the breakage of aerials, and oil leaking from a central heating system. It also covers damage caused by riot and malicious persons, storm, flood, the escape of water from tanks or pipes, subsidence, landslip or heave, and falling trees. The cover for subsidence involves an excess and many policies have an excess on other sections such as theft or flood.

Buildings insurance can't cover everything. Exclusions often include storm or flood damage to gates and fences, and frost damage. If the home is left empty or unoccupied for over 30 days malicious damage, water leakage and theft won't be covered. Other exclusions are damage caused by war, rebellion and revolution and damage caused by sonic booms and contamination from radioactive fuel or waste. Householders can be compensated for damage from this last cause through special arrangements with the Government.

The Sum Insured

• When householders buy contents or buildings insurance they must decide the right value to put on the items covered. This amount is known as the "sum insured". The premium to be paid depends upon this amount. Premium rates may be higher for certain special risks - for example for a home in an area where burglary happens frequently or for a thatched cottage.
• The sum insured must be sufficient to cover the total value of the goods and buildings concerned. Many people unfortunately underestimate the cost of replacing or repairing their homes and their contents. If the sum insured is set too low then, when damage occurs, the householder will find that the insurance could cover only a part of the cost.
• For buildings, insurance must cover the full cost of rebuilding the property including architect and surveyors fees and the cost of clearing away the debris and meeting any new building regulations or by-laws. This is not the same as the market value of the house.
• Rebuilding costs often rise at times when house prices are not moving and vice versa. Take the case of two identical houses in the same town. One is next door to a noisy factory in a crowded industrial area while the other house is on the outskirts of town with pleasant country views. The houses will command very different market prices but the rebuilding cost will be the same.
• For contents, the full value is the cost of replacing the house as new. If a everything in new policy is replacement as not taken, then an allowance should be deducted for wear and tear. The sum insured must be reviewed regularly, particularly at times of high inflation. Otherwise the householder will soon find that the sum insured is too low. Most insurance companies offer index-linked policies where the sum insured is automatically adjusted in line with general rises in costs.

Accidental Damage

Policies spell out clearly the risks they cover - like fire, theft and flood. For "accidental damage" cover you have to pay much more premium. Then, you are covered against such risks as spilling paint on a carpet, or dropping a camera and breaking it.

Indemnity or Replace-as-new?

Indemnity policies take full account of the wear and tear on goods so that any claim payment would reflect the age or condition of damaged items. For example the policy would pay less for a ten-year-old carpet damaged by fire than for a carpet which was only a few months old. Replacement-as-new policies provide for the full replacement of badly damaged or destroyed goods with new. There are usually some exceptions such as clothing and household linen.

Clearly, with such a policy, the sum insured (on which the premium is based) must be higher. For a replacement-as-new policy, the contents of the house must all be valued at their new price. Mixed policies can also be bought. These provide replacement-as-new cover for some items such as furniture, carpets and electrical goods which are less than a certain number of years old and indemnity cover for the rest.

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Ever wondered how you'll pay the bills if disaster strikes? You could take out insurance to cover certain debts in the event of an accident or unemployment, but is it worth it?

In a nutshell?

• When you take out a loan, credit or store card, you're often asked to take out an insurance policy. This is meant to cover the loan or card repayments if you become unable to afford them yourself because of illness, unemployment or because you have an accident or become disabled.
• Most policies also include a life benefit which will pay off the outstanding balance on a loan or card if you die. This type of insurance is called 'Payment Protection Insurance' (PPI). It can cover repayment of car finance, personal loans, credit and store cards, catalogue debts and mortgages.
• Very often, payment of PPI is included with the loan repayments. Although they're taken out at the same time, loans and PPI are different things. When a lender sells you PPI, you must be told the price of PPI separately to the cost of the loan or card. You should also be asked to sign for it separately.
• You don't have to take out PPI. However, some companies won't agree to give you a loan unless you do so. So, if you don't want PPI it might be better to go to a different lender.

Do I really need it?

Think carefully before you agree to buy PPI. Here are some questions to consider:

• The cost of the insurance. The cost of PPI can be high, so shop around to get the best deal.
• Do you really need to take out the insurance? You might already be covered under your life insurance or employer's sick pay scheme, which will cover the loan or credit repayments if your circumstances change.
• Does the insurance policy really meet your needs? Many PPI policies won't cover you in certain circumstances, for example if you're self-employed or have a particular medical condition.
• How long does the policy pay out for? Typically, PPI only covers the loan or credit repayments for twelve months. Also, many policies pay out in blocks of 30 days. This means that if you returned to work after 28 days, you wouldn't get a payment.
• Will you be covered for unemployment? PPI will only cover you for unemployment under very specific circumstances.

Other conditions to consider:

• You must normally be in permanent, full-time employment. This usually means you have to work at least 16 hours or more a week.
• If you full-time, but for a number of different employers, you may not be covered. Make sure the insurance company knows the exact details of your working arrangements before you take out PPI.
• Many PPI policies don't cover you if you're on a temporary contract or self-employed. Check the details of a PPI policy before taking it out.
• Some policies won't cover you if you're dismissed from your job or take voluntary redundancy.
• Many PPI policies won't cover you for certain illnesses. For example, policies don't usually cover conditions involving pregnancy, drugs or alcohol. Nor will they provide cover if you fail to disclose any pre-existing conditions.

Cancelling a PPI policy

• You have the right to cancel a PPI policy within 14 days of buying it, or 30 days if the policy includes life cover.
• If you pay monthly premiums for your PPI, you can usually cancel at any time, although you may need to give a period of notice.
• You may also be able to cancel a PPI policy due to mis-selling (see below).

Making a complaint about PPI

If you have problems claiming on a PPI policy, you should first complain to the insurance company. If you aren't satisfied with their response take your complaint to the Financial Ombudsperson service of your country, if applicable.

Mis-selling

If you're unable to make a claim, this could be because you were sold a policy which was wrong for your circumstances. If so, it's worth complaining to the company which sold you the policy as you may be able to get a refund.

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Put basically, insurance enables those who suffer a loss or accident to be compensated for the effects of their misfortune. The payments come from a fund of money contributed by all the holders of individual insurance policies. In other words, individual risks are pooled and shared, with each policyholder making a contribution to the common fund.

The contribution is known as the premium. Premiums are paid to insurers - these are institutions which accumulate the money into the fund from which claims are paid. The loss is in fact paid for by the policyholder making the claim and by all the other policyholders who have not suffered in the same way.

Insurers are professional risk takers. They know the probability of different types of risk happening. They can calculate the premiums needed to create a fund large enough to cover likely loss payments. Clearly, only a proportion of policyholders will require compensation from the fund at any one time.

So two important factors arise when calculating the premium. Firstly, the general likelihood that a loss will occur. Secondly, whether the particular policyholder is above or below average in risk.

Take three examples. In motor insurance a young person with a high powered car, or a driver with a long history of accidents will pay a higher premium than a mature and experienced driver with a modest saloon who has been accident free.

Similarly, the owner of a fish and chip shop will pay a higher premium for his fire insurance than, say, the owner of an office. The risk is greater, so the premium is higher.

Someone who is young, fit and in a risk-free job will find it easier to buy life insurance, and will pay lower premiums than someone who has a heart condition or is in a risky occupation.

Two kinds of Insurance

There are two different kinds of insurance - life insurance and general insurance. With life insurance you don't renew your policy each year. Instead, you agree to pay a fixed premium for a set number of years. In other words you enter a long-term commitment when you buy a life insurance policy.

What is the Difference?

General insurance pays out:

* if a car has an accident or is stolen;
* if a house catches fire or is burgled;
* if a holiday has to be cancelled;
* if someone is careless and damages other people's property.

Most life policies, on the other hand, pay out when an event happens;

* when someone dies;
* when someone survives beyond a specific date.

Anyone can buy life insurance but, of course, the premium will depend on your age, your health, and your occupation.

Husbands and wives can insure each other's lives. However, you cannot insure the lives of other people unless you have a financial involvement in their life. This principle of insurance is called "insurable interest".

Insurable Interest

Insurable interest is a fundamental principle of insurance. It means that the person wishing to take out insurance must be legally entitled to insure the article, or the event, or the life. In other words, the happening of the event insured against, or the death of the life insured must cause the policyholder financial loss. Mr Smith would not be able to insure Mr Brown's house because its destruction would not cause Mr Smith financial loss. Similarly, you cannot insure the lives of other people unless you have a financial interest in the life being insured. The principle of insurable interest demonstrates the difference between insurance and a wager or bet.

General Principles

Other principles apply to all kinds of insurance.

* Insurance can provide compensation only for the actual value of property. It cannot cover the loss of sentimental value, for example.
* There must be a large number of similar risks so that the likelihood of a claim can be spread among other policyholders. It must be possible for insurers to calculate the chance of loss so that a premium can be set which matches the risk.
* Losses must not be deliberate and not inevitable. Clearly, you could not buy fire insurance for a house which was already burning nor life insurance for someone on his or her deathbed.
* Lastly, there are some risks which have financial implications so vast that they can be dealt with only by the state. These risks (mainly those arising from war or the major escape of nuclear or radioactive material) are normally not insurable.
* Insurance takes the risk away from people's lives and businesses. It brings peace of mind to the policyholder. In return for paying premiums the policyholder knows that, if the unexpected happens, financial compensation will be available from the fund of premiums.

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