Understanding Health and Life Insurance

Health Insurance

Having health insurance is essential because paying for medical care is really expensive. Without health insurance, you must pay for all your medical bills and prescriptions “out-of-pocket” and that can be almost impossible.

You get health insurance so you can pay for appointments that keep you healthy, as well as pay for costs if you get sick or injured.

Insurance when you’re young

Parents and legal guardians can keep children on their health insurance until age 26. So, you should have some time before you will need to get your health insurance for yourself.

But it’s still a good idea to know some basics about how health insurance works and how to get coverage as you become an adult.

How health insurance works

Health insurance is unique in a lot of ways, so let’s go over the basics of how it works.

1. Unlike other insurance, health insurance also covers costs to keep you from getting sick.
   1. So, if you have insurance, things like annual checkups are free.
2. If you get sick or injured, the insurance will cover the cost of the doctor’s appointments and any prescriptions you need.
   1. For certain appointments, you may need to pay a copay. So, if the appointment costs $60, you may have a $30 copay.
   2. If you have a copay, you have to pay it when you see the doctor.
3. Your health insurance has a network, which are certain doctors and clinics where you can go to get low-cost treatment.
   1. If you go to a doctor or specialist that’s “outside your network” you will pay more for the visit.
4. If you need a medical procedure and your insurance plan has a deductible, you will pay for all the costs up to that deductible. Then insurance will pay for the rest.

Where to get health insurance

Once you need your own health insurance, there are different places you can go to get it:

• Employer-based health insurance is a plan you get through the company you work for. All the employees of the company and the company itself share in the costs they pay. The money to cover the premium is taken out of your paycheck.
• Private insurance is a plan that you can purchase by yourself if you don’t get insurance through your company.
• The health insurance marketplace is a network set up by the U.S. government that allows you to get private insurance at the lowest cost possible.

Smart Money Tip: Look for a job that offers health insurance

Getting health insurance through the company that you work for is usually the best way to get insurance. You’ll have a variety of coverage options to choose from to fit your needs.

Life insurance

As a teen, you probably won’t need to think about life insurance for a while. That’s because your household (family) probably doesn’t depend on you earning income to pay bills and survive.

But once you start earning income, if people depend on you and your income, then you will need to get life insurance. You get a policy that covers the income you use to support your household, so if you die, they have money to cover what you usually pay.

When you get a life insurance policy, you designate a beneficiary. When you die, the beneficiary receives the money from the insurance policy as a lump sum (they get the value of the policy all at once).

AD&D insurance

A variation of life insurance that you may also eventually need is Accidental Death and Dismemberment (AD&D) insurance. This insurance covers the same things that life insurance does, but for injuries that are not fatal. So, for example, if you get in an accident are paralyzed, this insurance would cover you.