All of us needs insurance as a way to protect ourselves from unexpected emergency situations. However, there are many types of insurance cover, and I have mentioned a few in my first post about insurance. The list can be overwhelming. Each company has its own product that’s not available in another, making the list even longer.
To help you better understand insurance products, here are the common plans that are offered in the market today. When reading, please bear in mind that coverage and description vary with products and with companies offering them.
I have only included the basic plans, which are stand-alone products. I will cover riders (which are called supplementary contracts) in a separate post.
|Life insurance||Death||Provides your beneficiaries a lump-sum amount of money when you die too soon.|
|Health-care/HMO||Sickness||Pays for medical care needs like hospitalization, in-patient medicine, check-ups and annual physical exams.|
|Critical illness||Major illnesses||Gives benefits when you suffer major illnesses. It pays a lump-sum amount for any qualified sickness and can be used to pay reimburse medical expenses, which makes it different from a health-care plan.|
|Accident insurance||Accident||Offers lump-sum amount of money for injuries or death resulting from accident, disablement, major burns or crime|
|Income protection||Terminal illness or death||Pays you or your beneficiaries a fixed amount for each month for a specific period of time—such as 5 years—when you die too soon or diagnosed with a terminal illness.|
Life insurance is a type of cover that allows your beneficiaries to get benefits when you pass on. The insurer gives a one-time payment to the people that you leave behind. Its purpose is to protect loss of income when you pass away suddenly and unexpectedly.
There are many types of life insurance, but they can be broken down into two:
- term insurance
- whole life insurance
A term life insurance gives you cover for a specific term, hence the name. You can purchase and pay for a policy that’s good for a year, and then pay it again when it renews when the year ends, and so on. A whole life insurance on the other hand covers your life span. Some can insure you for 88 to 100 years old. Usually, you’re asked to pay the entire policy for a number of years and once it’s paid up, you’re insured until you reach the age set by the policy.
Health-care plan/HMO (health maintenance organization)
A health-care plan is like an emergency fund in times of sickness. It can pay for your hospital stay, surgery and other medical expenses. For as long as your policy is in force, it reduces your out-of-pocket spending when you are sick and need medical attention in a hospital.
In the Philippines, we have two providers: government through PhilHealth and private companies such as health maintenance organization (HMO) and insurance companies.
A health-care plan can pay your bills at the hospital when you check out. A health insurance, on the other hand, can’t. Instead, it pays you after you have been diagnosed with a critical illness.
Do you still need a health insurance if you have a health-care plan?
Yes. A health-care plan has a certain limit per year, called annual benefit limit (ABL). Once you reached the cap, say P100K, you will then have to pay straight from your own pocket.
A health insurance plays its role when you are sick with a major illness, such as cancer. When your health-care cap is reached, which it most certainly will especially in long-term, expensive cancer treatment, health insurance can be used to allow you to afford the treatment in order to recover.
An accident insurance gives you or your beneficiaries an amount of money when you suffer either injuries or death from accident or if you are a victim of a crime. It is cheaper compared to life, but it also has very short list of situations that they will be going to pay.
Income protection is a plan that provides your or your beneficiaries a monthly income if you die too soon or are diagnosed with a terminal illness.
A terminal illness means any health conditions so severe that you are given only a year or less to live by a physician. A critical illness, on the other hand, does not have any condition on how long are expected to live.
The monthly payment is the one characteristic that makes it different from the other products mentioned above.