When one engages in any insurance as a policyholder, they are doing what economists call risk management. To hedge oneself from a certain risk-fortuitous or otherwise-a premium is paid to another entity that will indemnify when it does happen by pooling together resources. Such events can come in the contraction of an illness, a debilitating disease, and a disabling accident. Individuals who wish to be shielded from the heavy toll of these events, not just on the body but also on the resources, acquire one or two health insurances or medical plans.
In principle, the fee or the premium is determined by the risk severity and frequency. The premium is likely to be higher for those whose health risks are assessed to be serious, probable, and recurring. This explains why health insurance premiums tend to be more expensive for buying at their old age. People who smoke, drink, and take drugs may have difficulty securing a medical plan or paying a large sum for a premium. Sometimes, those who are engaged in extreme sports or hobbies cannot get one unless their activities are excluded from the insurer’s list of accidental losses.
The US government will have medical plans for those with disabilities and those who are already 65-years-old, above. Since social health insurance works around the principle of resources pooling to provide coverage, the person insured will have the advantage of lower premiums despite predictable and probable losses. A certain degree of stability is also guaranteed because the risk is shared both by the government and the citizenry. Of course, health insurance of this type also provides a wide range of accredited physicians and clinics, extending to all states.
However, the limited coverage of public health insurance may be appealing to many. Those who go for private medical plans have wider coverage in terms of health risks, including chronic and debilitating diseases, which may require prolonged hospitalization and treatments. Some insurers allow their clients the flexibility of choosing their preferred and trusted doctors and hospitals, an attractive feature of this health insurance. Inclusion of the health of the immediate family members in the coverage is also possible, for an extra fee. As one may have already observed, private medical plans are costly and perhaps a luxury these days.
While insurance has been highly commercialized, evolving into many forms to suit every person’s needs, there is still the old self-insuring school. To manage risks and possible losses in the future, people are satisfied with saving their money in the bank instead of paying health insurance premiums. But factoring into the equation the rising inflation every year and the minuscule interest that the bank gives, the funds deposited will decrease in value over the years. As an investment, it is wise not to put all the eggs in one basket. Self-insuring may be continued, but alongside, an insurance policy must also be secured and enforced for a better hedge in the years to come.
