What is Health Insurance?

Health insurance is a type of insurance which pays for medical expenses when the insured becomes sick due to covered causes, or due to accidents. This agreement between insurer and the insured is call the health insurance policy.

A health insurance policy is a binding contract issued by an insurance company to an individual or group which promises to pay for health care reasonably required by the "insured" or "policy holder" to treat illness or injury. If the insurance policy is issued to an individual, the individual applies for the policy and pays the premiums either directly or through payroll deduction, if acquired through their employer. Typically, in individual health insurance the individual policyholder is insured and also, in exchange for a higher premium, the insurance covers a spouse and dependent family members.

In the circumstance where the health insurance is obtained by an employer or a group or an association, the entity is the "group policyholder" and the covered individuals receive "certificates" of insurance. Generally, in addition to payment of premiums by the policyholder, the insured is also responsible for payment of deductibles and co-pays (a percentage of actual charges or a fixed amount per visit) which are predetermined in the policy at set amounts or rates.