Life is unpredictable. From a car accident to an unexpected medical emergency, you can’t really foresee the unfortunate incidents that may happen at one point or another, but you can, however, protect yourself financially against them. For that reason, investing in an insurance plan is becoming more and more imperative.
There are many different kinds of insurance policies out there with different coverage, terms, benefits, and attributes. While getting an insurance plan can contribute to a sound financial future, choosing the right policy is equally as important. Below is a brief guide that can help you understand the different aspects of insurance and ultimately choose the right policy for your current needs.
Your Current Situation
First and foremost, choosing an insurance policy has to be primarily based on your current situation which includes your age, your current income, your ability to pay the insurance premiums, your medical state, the benefits you receive from your employer, your future financial plans, and whether or not you have dependents to provide for.
Local Legal Requirements
Insurance laws vary from one country to another and in some countries, certain types of insurance are mandated by law. This is particularly true for auto insurance. When it comes to insuring your vehicle, these policies depend on the kind of car you drive, whether you use it for personal or professional reasons, the kind of coverage you want, and your mileage limits among other factors. If the law in your country of residence states that you must have auto insurance, then you may be faced with a hefty fine as well as other legal implications that can make it hard for you to get back on the road in the future if you’re caught without an insurance policy.
Premiums are the amount of money you pay for the insurance plan on a regular basis, either annually, quarterly, or monthly. While getting a plan with the cheapest premium may sound like an economical decision, it doesn’t necessarily mean that the policy will cost you less overall. In fact, lower premiums often result in higher deductibles, out-of-pocket costs, copays, and coinsurance.
Your insurance deductible is the set amount of money that you must pay out of pocket before your insurance benefits kick in. For instance, if you have a health insurance policy with a $2500 deductible and you underwent 3 $1000 procedures in a year, you’ll have to pay the entire bill for the first 2 procedures and half of the third one before your insurance can cover the second half of the third procedure.
Policies with cheaper deductibles usually offset this lower cost with higher premiums which is why if you’re in good health and you have no history of chronic or serious diseases that can cause possible future complications, you can increase the deductible to lower the premiums on your policy.
Insurance Copays and Coinsurance
In insurance plans, copays and coinsurance are used to spread out the cost of service to ensure that you only get the benefits and coverage you need. A copay is a flat rate you pay for using routine services defined by your plan. This means that if your insurance policy charges a copay for certain services, then you’ll pay much less for these routine procedures right away, even before you meet your deductible.
Coinsurance, on the other hand, is the percentage of expenses you pay after you’ve reached your deductible. Some plans come with no coinsurance requirements and others come with different percentages of coinsurance so, make sure that whatever policy you pick has the right combination of copay and coinsurance to actually cover your needs.
Maximum out-of-pocket Costs
Your out-of-pocket maximum is an important aspect of your insurance plan because it limits the total amount of money you pay each year for insurance benefits. For example, if your policy carries an out-of-pocket maximum cost of $5000 and you require a lot of health care services in a year that exceeds that amount, the most you have to pay will be $5000 and your insurance will cover the rest as long as you stay within the insurance network.
Choosing the right insurance policy will not only determine the kind of care you receive should something go wrong, but it can also be the wild card that will protect you against financial ruin in the future. Each insurance company offers a variety of plans to choose from and each of these plans has varying coverage, terms, and benefits which can make choosing the right insurance policy a little confusing.
So, before you choose a plan, take the time to assess your needs and based on your insurance needs, be sure to compare different policies from different providers in relation to the aspects mentioned above to ensure that you end up with the best fit for your current and future needs.