Having adequate health insurance is crucial; health insurance ensures that you and your loved ones will receive the necessary medical treatment throughout the course of your lives. Health insurance protects you and your dependents from suffering a financial catastrophe caused by high medical expenses. Paying out of pocket for either a short or an extended hospital stay can be very expensive. Health insurance allows you to receive the necessary medical care if you or your dependents are injured or become ill. Health insurance offers you peace of mind and eliminates the financial risk of having to make large payments to health-care providers for injury or illness.

There are four major types of health insurance coverage: basic health insurance, major medical expense insurance, dental and eye insurance, and dread disease and accident insurance.

The three major providers of health insurance are private health-care plans, nongroup coverage plans, and government-sponsored  health-care plans. There are two types of private health-care plans: fee-for-service plans and plans provided by managed health-care providers. There are four main types of managed care providers: health maintenance organizations (HMOs), preferred provider organizations (PPOs), point of service plans (POSs), and exclusive provider organizations (EPOs).

Nongroup coverage plans (also called individual health-care plans) are health insurance plans that cover individuals on a case-by-case basis. Finally, government-sponsored health-care plans are insurance plans that are sponsored by either the state or the federal government. Government-sponsored health-care plans fall under four headings: workers’ compensation, Medicare, medigap, and Medicaid.

There are four important things you can do to control your health-care costs:

1. Live a healthy lifestyle.
2. Use a medical reimbursement account or health savings account.
3. Take advantage of COBRA when changing jobs.
4. Opt out of a company insurance plan if you are already covered through a spouse’s or parent’s plan.

Now that you have completed this section, ask yourself the following questions:

1. Do I understand how health insurance relates to my personal financial plan?
2. Can I explain basic health insurance coverage and health insurance plans?
3. Do I understand the key areas of disability insurance?
4. Do I understand the key areas of long-term care insurance?
5. Do I understand how to control my health-care costs?