The purchase of a health insurance policy for the first time is, in many ways, a rite of passage – a signal that you have passed from child to adult. The purchase of a health insurance policy is also one of the more expensive acquisitions you will make during your life, rivaling the expense of buying a home. At the same time, most people do not understand health insurance or the components of the contract between insurance companies and themselves, often learning to their dismay that coverage they thought they had is actually nonexistent.
The way to avoid lacking vital health coverage when you need it most starts with understanding policy basics.
Definition of a Health Insurance Policy
A health insurance policy is a legal contract between an insurance company and the owner of the policy. Generally, the contract is limited in term, requires a payment by the policyholder to the insurance company (premiums), and details various conditions under which the insurance company will be responsible for the costs of medical care of the policyholder and possibly his or her family.