There are four major types of health insurance coverage:

1. Basic health insurance
2. Major medical expense insurance
3. Dental and eye insurance
4. Dread disease and accident insurance

Basic health insurance: The term basic health insurance describes most health insurance policies that cover hospital, surgical, and physician expenses. Basic health insurance can be subdivided into three main categories: hospital insurance, surgical insurance, and physician expense insurance. Hospital insurance covers hospitalization expenses, including room, board, nursing, and prescription fees. Surgical insurance covers only the direct costs of surgery, including the equipment costs and surgeon’s fees. Finally, physician expense insurance covers physicians’ fees, including fees for office visits, lab tests, x-rays, and other necessary tests.

Major medical expense insurance: Major medical expense insurance covers medical costs that are in excess of those covered by basic health insurance. This type of insurance normally requires you to pay a co-payment and/or a deductible., and has some overall limit, such as $750,000.

A co-payment is an amount of money you pay to help cover medical costs that you incur. A co-payment may be a flat amount, such as a $15 payment each time you visit a doctor’s office, or a co-payment may be a percentage of the total cost of a surgical procedure, such as a payment that covers 20 percent of the surgical fee. The insurance company pays the remaining balance of the medical cost—for example, the insurance company pays $50 for the office visit to supplement your $15 co-payment and 80 percent of the surgical fee to supplement your 20 percent co-payment.

A deductible is the amount you pay in full before you receive any benefits from an insurance company. For example, if your medical bill were for $1,000, and you had to pay a $200 deductible on your insurance plan, then you would pay the first $200 and your insurance company would pay the remaining $800 of the bill.

Major medical insurance usually includes both a stop-loss provision and a lifetime cap. The stop-loss provision limits your total out-of-pocket expenses to a specific dollar amount. The lifetime cap limits the total amount the insurance company is required to pay over the life of a policy.

Dental and eye insurance: Dental and eye insurance covers just two expenses: expenses for dental work and expenses related to eye care. Dental and eye insurance pays for the costs of dental work, dentures, eye exams, glasses, and contact lenses. You should know which expenses your plan covers before you go to the dentist or eye doctor. Normally, this type of insurance covers only a portion of the costs and requires you to pay the rest. Dental and eye care insurance plans are often expensive unless they are provided as part of an employee insurance plan.

Dread disease and accident insurance: Dread disease and accident insurance is a unique type of insurance that covers specific diseases and accidents. If your illness is not on the list given by the insurance company, it won’t be covered. This type of insurance provides a set dollar amount that is available for reimbursement. If your expenses exceed this amount, you must pay the difference. It is generally best to avoid dread disease and accident insurance unless it is included in your company’s total health plan. Instead, you should concentrate on finding health insurance coverage that is as comprehensive as possible so that you will be protected against the widest variety of diseases and accidents that could occur.