Health Insurance Definition | How Does Health Insurance Work?

1. What is Health insurance?

Health insurance is a risk management tool that provides protection and peace of mind against the financial burden of health care costs.

2. Why do I need health insurance?

You need health insurance in case of an unexpected medical emergency. When you are young and healthy, the risk of needing expensive medical care is small, but as you age or experience changes in your lifestyle (i.e., becoming pregnant), your health care needs may increase significantly.

By purchasing insurance before it’s needed, you will have financial protection from the large out-of-pocket expenses that may result from a significant health event.

3. Who needs health insurance?

If you have a job, your employer typically provides group health insurance at no cost to you as long as you work for the company. However, if this coverage is inadequate or unaffordable, you should consider purchasing an individual health insurance plan.

If you are a stay-at-home parent, unemployed or self-employed, it may be expensive to purchase a policy on your own. In these cases, group coverage from an employer is preferable.

4. How does health insurance work?

When a person has a medical condition that requires treatment, the first thing they do is visit a doctor who diagnoses them and treats them accordingly.

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Once the person leaves with medicine or treatments prescribed to them, they are responsible for the cost. For example, if you require antibiotics to treat bronchitis, once your condition clears up, you must pay for these medications yourself unless you have health insurance.

5. Why do I need health insurance?

Everyone knows that maintaining good health is important, but what many people don’t realize is just how expensive it can be to deal with a major illness or injury.

Instead of leaving yourself and your family vulnerable to massive medical bills especially when you most need help, speak with one of our insurance professionals who can explain the benefits and features of our most popular health insurance plans.

6. How much does health insurance cost?

The cost of health insurance will vary by company and the level of coverage you select. A worldwide plan may include coverage for travel to other countries while a basic plan would only cover you in your home province.

Generally, most companies offer plans that cover 80% of eligible expenses with a maximum coinsurance amount, which the percentage is paid by the employee.

7. What is the difference between HMO, PPO, and POS plans?


Health Maintenance Organization plans are a way for an insurance company to control which doctors you see, the hospitals you visit, and the procedures offered.

They also have substantial co-insurance which means that if you choose a specialist or hospital out of their network, they will not cover any portion of your bill. Also, HMOs do not generally cover prescription medications.

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Preferred Provider Organization plans are similar to HMOs except that they give you a larger scope of choice. Unlike PPOs, you must first try going to a doctor within the network before seeing an out-of-network doctor. This allows you to have greater freedom when choosing a specialist or hospital, but you will still have to pay 20% of the bill.


Point of Service plans is another hybrid that borrows elements from both HMOs and PPOs. The main difference is that in addition to having the option to go out of network, you also have the choice between seeing a specialist within the network or going to the doctor who prescribed your original treatment.

8. How can I receive discounts on health insurance?

Many companies offer a discount on their monthly premiums if you enroll in an automatic payment plan such as pre-authorized debit (PAD) where payments are made directly from your bank account.

Also, some companies will provide a discount for enrolling in a wellness program such as smoking cessation, weight loss, and healthy living classes.