People are naturally afraid of risks, because these events are fortuitous that can take a heavy toll on their physical, psychological, and financial capacities. Mathematically, the probability of risks can be calculated. However, at best, the geniuses can only reach an estimate, and never a fixed forecast. This is the case with impersonal, natural calamities. But with people’s health, the risks can reach a degree of probability, if not certainty, because of behavioral and occupational causes that led to specific illnesses or disabilities. Still, they remain as risks, with respect to the time of their occurrence. Health risks are closer to home, and it is no surprise that most people will want to manage or reduce them in their lifetime.

An option available for them is to remove the burden of shouldering the cost of health risks and placing them on somebody else’s, for a price, of course. Another is to form or join a group that is willing to share the risks, as long as one is also willing to do the same, again, through a re-determined and regular mode of payment. This kind of mutual relationship is called health insurance. The agreement or covenant, signed and enforced, is termed as insurance policy. The person availing it is often called the insured, while the entity that hedges the risks is the insurer or insurance provider.

The kind of risk covered and their frequency of occurrence determine the fee, or the health insurance premium. Those who are in their 20’s or 30’s, or even younger, and who have been reckoned to be normal and healthy, will qualify for cheaper, affordable premiums. Health risks with them are comparably low; hence, their share should be proportionate. On the other hand, those who are older can still be covered, but at a higher premium, because they are more susceptible to illnesses and disabilities. Paying the high price of high risk are those who are smoking, doing drugs, and drinking every night. People with particular disposition toward extreme sports, dare devil hobbies, and potentially life threatening occupation in life are likewise expected to pay expensive premiums.

In addition to health insurances provided by the government and sometimes the employer, people with the means are also getting personal medical plans from private insurers. One reason is the exclusion of loved ones in the coverage of the usual health insurances. Then, there is also the restriction of coverage, in terms of list of indemnities and accredited specialists and hospitals, as some people will want their own family physicians, trusted doctors, and preferred clinics. Private insurers are flexible enough to accommodate these particulars, which are otherwise dismissed in government health insurance and that which an employer may not co-insure. There is a catch though; personal health insurance premium will be costly, commensurate to the aforementioned benefits.

Of course, there will always be the option of self-insuring, through which people create a pot, that is, a bank account, where they can deposit their savings, hopefully with regularity. While it reduces risks, it may be insufficient to manage them. The bank’s interest may not be able to catch up with inflation that rises in small increments every year, and the value of savings is likely to decrease in five or ten years’ time. A bank account is a good basket of choice, but it is unwise to put all of the eggs in just one. Why not combine it with one or two types of insurances?

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Category: Finances
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