What Is Individual Health Insurance?

Health insurance covers medical expenses for illnesses, injuries and conditions. But, unlike a plan through an employer, individual health insurance is something you select and pay for on your own. So, what’s health insurance for and why do you need it?

• Because accidents or health problems can happen at any time
• Medical expenses can be high—they’re the number one cause of bankruptcy
• To gain access to a network of doctors and hospitals that have negotiated lower rates with insurance companies
• To pay and keep track of medical payments quickly and easily
• To safeguard your way of life and your family’s physical and financial wellbeing

Understanding Health Insurance Terms

We know health insurance has its own language with different terms, like “deductibles,” “coinsurance” and “copayments.” Once you get a good grasp on some of these basic terms, you’ll see how simple health insurance can be. Let’s start by defining these terms:

Deductible: This is a set amount you have to pay toward your medical bills every year before your insurance company starts paying. It varies by plan and some plans have no deductible.

Premium: This is the amount you pay your health insurance company to keep your coverage active. Most people pay their premium monthly.

Coinsurance: This is the percentage of your medical bill you share with your insurance company after you’ve paid your deductible. Unless you have a policy with 100 percent coverage for everything, you have to pay a coinsurance amount. For example, if you have a $100 doctor’s bill and your plan covers 80 percent of it, your coinsurance amount due to the doctor’s office is 20 percent, or $20.

Copayment (or “Copay”): Your copayment, or copay, is the flat fee you pay every time you go to the doctor or fill a prescription. It’s usually a relatively small dollar amount. Copays do not count toward your deductible.

There are other insurance terms that may be confusing to you, but starting with these four is a good foundation. You can always check our glossary for more terms and definitions.