Just about everyone has some kind of insurance policy -- whether it's automobile coverage, health coverage, or some other type of insurance -- but how much do we really understand about our policies and what they actually cover? Certain elements of insurance policies are universal, such as the declarations section identifying who is insured, the risks or property covered, the amount of coverage, and other standard information. But regardless of the type of insurance product, they all take the form of a legally binding contract. FindLaw's Insurance Policies section will help you make sense of your insurance policies, fine print and all, to help you make better decisions in your own coverage. It's important not only to have the proper amount of coverage, but also to avoid paying for something you may not really need. This section explains how deductibles work, the purpose of the insurance declaration page, the meaning of a copay, how PPOs and HMOs differ, and more.
Parts of an Insurance Policy: At a Glance
Insurance policies are often quite lengthy and detailed, but they need not be an impenatrable "black box" of legalese. After all, this is something you'll be paying into for a matter of years, decades, or even for life. And when you need insurance, you don't want any surprises. Some of the main parts of an insurance policy are listed below:
- Declarations - Name of insured party, risks/interests covered, amount insured, deductions (if applicable), policy period, premium amount.
- Exclusions - Lists all that is specifically not covered under the policy.
- Conditions - Rules, duties, and obligations for coverage eligibility.
- Endorsements - Policy forms that modify the agreement in some way, often with respect to a certain condition.
- Riders - Used to state the terms of amendments to an insurance policy, such as name changes or changes in benefits.
Copays, Premiums, and Deductibles
Virtually every insurance policy has premiums, which are regular amounts paid (usually monthly) to the insurance company. The insurer treats these premiums as income, but they must manage their cashflow in such a way that they can cover claims from their clients. A lot goes into the calculation of just how much a premium to charge, including the level of risk involved, the cost of honoring claims, where the policyholder lives or does business, and standard business concerns (i.e. the need to compete with other insurers).
A deductibles, meanwhile, is the amount of money insured individuals may be required to pay out-of-pocket before insurance benefits kick in. For instance, a health care insurance plan with a $2,000 annual deductible requires its policyholder to pay the full price for prescription drugs, routine checkups, hospital visits, and other "covered" services until the $2,000 mark is reached. After that, the insurance company will pick up the tab.
The copay is another recurring fee paid sometimes by policyholders, often for prescription refills, medical office visits, or other services covered under the policy. For instance, you may have to pay a $15 copay each time you visit your doctor or fill a prescription. They generally do not count toward the deductible but are intended to prevent the overuse of covered services by policyholders.
This is just a brief overview of what's under the hood of the average insurance policy. Click on a link below for more detailed information.
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