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How Does Health Insurance Work

There are different kinds of health insurance in the USA provided both by government and private programs. You should learn how health insurance works before getting a contract.

Health insurance companies are to pay a portion of the customer's medical expenses if he is sick or injured and needs medical care. The insurer covers health expenses under the assumption the premiums are paid on time (as a rule premiums should be settled each month). Health insurance plans are usually sold once and then renewed annually.

The contract specifies the portions the company and the customer should pay. The amount one should pay before the insurer will cover anything is called deductible. After the deductible is paid out, the insurance company will cover 80% of the expenses for a plan with 20% coinsurance. If you want to get lifetime maximum you should cover medical expenses in a given year that is called "out of pocket limit". Some plans require you to pay a co-payment, a specific flat fee for each medical service.

The contract may include benefit limitations. For example, the total amount the insurance company will pay out in benefits for you may be limited. You should carefully review the contract to make sure the terms are favorable to you.