Medicare Open Enrollment Period

Review Your Coverage: Take Advantage of Medicare’s Open Enrollment Period

Medicare Open Enrollment PeriodThings happen and things change including your health and sometimes your health plan as well. Take advantage of Medicare Open Enrollment Period (OEP) to review your current coverage and make sure it is still what you need from your health insurance plan.

Open Enrollment Period is October 15 to December 7. So right now is your opportunity to choose the best coverage for your needs. The choices you make now will be effective for all of the new year. You cannot make any changes until next Open Enrollment Period a year from now, unless you qualify for an exception or have Original Medicare with a Medicare Supplement Plan.

Information Checklist for Comparing Medicare Plans

Our information checklist will help you gather the information you need to reference when reviewing your current plan and comparing other available plans.

  1. How is your general health?
  2. Has your health changed considerably in the past year?
  3. Ongoing conditions such as high blood pressure or diabetes?
  4. Vision or hearing problems?
  5. One-time health needs such as illness or injury?
  6. How often do you visit the doctor?
  7. Do you see any specialist?
  8. Do you live in a long-term care residence or skilled nursing facility (nursing home)?
  9. Do you have a planned surgery or procedure coming up?
  10. Review your summary of benefits you periodically get from Medicare or your Medicare Advantage plan, this lists the services you received and the costs.
  11. Prescriptions Drugs (all formularies are different and may affect which plan is the best plan for you)

Factors That Apply to Your Healthcare Plan Usage

Now that you have gathered the items on this checklist, please keep in mind the following factors as it applies to your health and usage of your plan.

  1. Monthly Premium, if any
  2. Deductibles
  3. Co-payments
  4. Coinsurance
  5. Max Out of Pocket (this is your maximum risk if your health dramatically changes during the year)
  6. Does the plan reimburse the Part B Deductible?

Once you have gathered this information, you are ready to start comparing plans at

Are You Eligible for Medicare Yet Still Working? How Does This Affect Your Medicare Coverage?

Great news – whether or not you retire at age 65, you are still eligible for Medicare!

If you, or your spouse, are still employed you may have health insurance through that employer.  The first step you should take, before you enroll in Medicare, is to talk with your human resources department.  You will need to know which kind of health plan you are currently enrolled in and how (if at all) that health insurance will change if you enroll in Medicare.  This information will help you evaluate your Medicare choices and decide which plan is best for you.

Medicare Part A, which is hospital coverage, is premium-free for most people.  It’s a good idea to enroll in Part A as soon as you’re eligible, as long as you qualify for it premium-free.  However, if your employer plan is a Health Savings Account (HSA) – speak to your employer first.  They may stop contributing to your account if you enroll.  This is why it is very important to learn exactly how Medicare will change your current benefits.

Medicare Part B, which is doctor and outpatient coverage, does charge a premium.  For the year 2018, the premium starts at $134 per month with increasing premiums for people with higher incomes.  Many people who are still working and have group health coverage delay enrolling in Part B in order to postpone paying this premium.  Also, the Medicare Part B benefits may be of limited value to you as long as your group health plan is the primary payer of your medical bills.

Also, be aware that Original Medicare – Parts A and B – do not include coverage for your prescriptions, as does a traditional HMO or PPO plan from your employer. For this you’ll need to enroll in a Part D plan that’s available in your state. Medicare prescription drug plans start at less than $20 per month.

As with your employer’s health plan, Medicare does not cover all costs. Parts A and B have co-insurance and deductibles baked in, and they are pretty hefty. After you pay the deductibles, Original Medicare covers 80 percent of approved costs, leaving you on the hook to pay the rest. This can be devastating if you don’t buy supplemental insurance, called a Medicare Supplement or Medigap plan. They are called Medigap plans because they cover the insurance gaps. They can range from about $120 to $500 per month, depending on where you live and how much coverage you need.

PLEASE NOTE:  If you work for a small company (20 employees or less), speak to your employee health benefits administrator before making any decisions.  In this case Medicare is the primary payer and your group health insurance would be the secondary payer.


Optimizing Your Medicare Prescription Drug Plan

If you take regular prescriptions, you already know how expensive it can be. The older we get, the more chronic conditions set in, and our medications get even more expensive. That’s why having a prescription drug plan is so important.

For people with Medicare health insurance benefits there are two ways to get drug coverage. You can enroll in Original Medicare and opt for a Medicare Prescription Drug Plan (PDP). If you choose, you may enroll in a Medicare Advantage (MAPD) Plan, known as Part C, which includes prescription drug coverage.

Ideas to help you save out-of-pocket expenses:

  • Avoid the late enrollment penalty by opting for prescription drug coverage as soon as you are eligible.
  • Choose the right plan for you. Use the Plan Finder tool which can help you find out which plans are available in your area. Then you can compare the various options.
  • A formulary is a list of drugs your plan covers. Be sure your plan’s formulary includes the drugs you need, or you will have to pay for them out-of-pocket. Many plans also group drugs into tiers, with those in lower tiers costing less than those in higher ones. If you have been using expensive drugs in a higher tier, check with your doctor if there are generic drugs or equivalent lower tier drugs.
  • Use generic drugs if possible with your doctor’s approval. They are as safe and strong as brand-name drugs, and there is often little or no copayment.
  • Refill less often. Instead of buying the drugs you need every month, buy a two- or three-month supply. You’ll save money by buying in bulk, and you’ll only have to make one copayment to fill your prescription.
  • See if there’s a pharmacy with mail service in your plan; it’s often less expensive.
  • Find out if you qualify for Extra Help to help meet your prescription drug costs.

In conclusion, there are things you can do to help keep your prescription drug costs down, if you are diligent to attend to these details.

The Most Important Things to Keep Yourself Fit

Our organism needs like 40 kinds of nutrients in order to function properly. The most needed are amino acids, vitamins, minerals and essential fatty acids. As we need energy to function and receive it from processing food, our eating habits have great impact on our well being and body shape.

Habits, traditions, taste, cultural and social circumstances fundamentally determine our eating style. To set up a healthy eating habit, we need to focus not only on the basic elements, but also on quality and quantity of the food as well.

In order to keep our body fit and maintain a proper weight, besides the constitution, lifestyle, gender, age and inherited features, we can watch over the daily calorie intake with the help of a Calorie Counter . Whoever systematically consumes more calories than needed, most likely will gain fat in excess.

It is also recommendable to avoid too much stress and noise pollution as it increases tension and hinders the regeneration of the body. In stressful situations the blood pressure increases, the heart beats faster, the respiration is rapid and as the stress hormones are released, a whole chain of reaction takes place in the body. If the cause of the stress is eliminated, the body returns to its normal function. However, if the stress lasts too long and it is not followed by a recharging period, we can get exhausted and serious health problems may occur.

If it is possible do not miss a good night sleep, as during it growth hormones are released to help the tissues to regenerate and the body rests. But as a matter of fact nowadays almost everyone has to live a quite stressful life. You can also reduce the unwholesome effect of this with a healthy diet. This helps your body remain fit and strong and collaterally ease you to develop effective coping techniques with stress.

In order to keep our body fit and to maintain physical condition we need to exercise. Please remember that great physical condition is not always equal to good health but it certainly is a sign of it. If it is possible, choose something you like and what involves and works out all muscles types.

Exercising systematically will result in increased muscle and heart efficiency, improved blood circulation, easier respiration and the elimination of toxic substances will accelerate. We become more agile, flexible, our reflexes will sharpen and our immune system will be more resistant to different illnesses. Personal hygiene is also a base pillar in maintaining health as well as some exams and screenings by a health care provider should be done yearly, depending on age, medical and family history and individual choices. Exams and screenings should include a mammogram every 1-2 years (over 40 years of age); a Pap test every 1-3 years; and checks for blood pressure, sexually transmitted diseases, vision, dental, diabetes, depression and more.

Obesity – Is This Really a Fact Insurance Companies Should Deal With?

Most people receive their health care through managed care companies or health maintenance organizations; unfortunately, few include treatments for obesity. Obesity is a serious disease associated with increased mortality rates and an independent cause of hypertension, type-2 diabetes, coronary artery disease, degenerative joint disease and several types of cancer. These disorders are the most common, are very serious and cost a lot when treated.

There are many people that are prescribed treatment for obesity, but their health insurance neither covers nor reimburses those services, however many insurance companies will pay for treating conditions caused by obesity, such as type-2 diabetes and heart disease. But these two conditions as serious as they are represent only the tip of an iceberg, as the list includes more.

Because of this lack of coverage, more people are in need of obesity treatment services. For many overweight and obese individuals the costs of services are a deterrent to seeking and receiving treatment, they simply do not have adequate funds to pay for treatment out of pocket.

It is a very dejected fact, that obese patients get little support from health insurance institutions. For making a change, individual physicians, other health care providers and their patients and families need to be proactive in obtaining improved reimbursement. Patients should be encouraged to talk with their employers about including coverage, health care professionals should also take opportunities such as health fairs and meetings with state and federal elected officials to communicate the true picture of the obesity and the need for treatment.

In such efforts, confidence and persistence counts and in the past years luckily the opinion about obesity has significantly changed. The health care system is already paying millions of dollars treating disorders that could be prevented or ameliorated by sustained weight loss, so let your voice be heard.

Rolling Over MSAs into HSAs

How is rollover of a Medical Savings Account (MSA) into an HSA treated by the federal government for tax purposes?

Funds from an “Archer MSA” may be rolled-over into an HSA within 60 days of withdrawing the funds from the MSA. There are 2 different types of rollovers and the differences are critical in terms of tax implications:

1) Trustee-to-Trustee: this involves a direct transfer of funds from the old MSA trustee to the new HSA trustee, and there is no money or checks that the individual receives directly. This is technically not a rollover, because a rollover means that the funds were first distributed to the individual participant. This trustee-to-trustee method does not trigger a taxable event since the participant never touches the money. Trustee-to-trustee transfers are not subject to any tax withholding and are exempt from the one per 60 day rollover rule.

2) Actual Rollover: a rollover occurs when the trustee distributes the MSA assets directly to the individual participant (the participant receives the check). In this case, the individual must transfer the assets to the new trustee within calendar 60 days after the receipt of the distribution. An IRS reporting requirement and potential tax penalties are imposed if the person misses the 60 day deadline.

In general, individuals are allowed one MSA to HSA rollover per 12 month period. In addition, asset rolled-over during the previous 12 months (e.g. MSA to MSA) are not eligible for rollover.
If a rollover is made from the MSA that does not meet the criteria described above, the action will be considered a non-qualified distribution that should be included in the account beneficiary’s gross income and also subject to an additional 10% tax.

Tax treatment of MSA to HSA rollovers can vary at the state level. The federal government does not tax MSA to HSA rollovers as long as the rollover meets the criteria described in item 5 above. Therefore, states that have harmonized their tax treatment of HSAs with the federal government will also allow tax-free rollovers. In states that have not harmonized HSA tax treatment with the federal government, MSA to HSA rollovers would be considered a non-qualified distribution. The rollover funds would therefore be subject to state income tax plus a 10% penalty.

If I live in a state that has not harmonized its HSA tax treatment with the federal government, then what are my record-keeping overheads to do my federal and state taxes correctly?

In this situation, the individual has significant record-keeping responsibilities. Record-keeping requirements would pertain to HSA contributions as well as the account’s earnings as the earnings would be subject to state income tax. Qualified distributions would be tax-free since fund contributions have already been taxed at the state level. Tracking the income (e.g. interest, dividends, realized capital gains) that an account holder should report on a state tax return could prove challenging and is significantly affected by the reporting capabilities of the given financial institution.

Generally, the HSA owner needs to keep a permanent record of: a) the deduction taken at the federal level for the HSA contribution; b) the amount of income generated during the course of a given year, and; c) the amount of income that has been reported each year for state income tax purposes.

If you rollover an MSA into an HSA in a state like California, those rollover funds would be considered a “non-qualified distribution” and would be subject to state income tax as well as the 10% penalty.

Health Savings Accounts and Taxes

HSAs have a “triple” tax advantage from a federal tax standpoint. Individuals receive full tax advantages for HSAs on their Federal Income Tax return (or through a salary reduction program in certain employer-sponsored settings) regardless of particular state’s tax treatment of HSAs.

An account beneficiary may take an above-the-line deduction (i.e. the amounts may be used to determine the individual’s adjusted gross income before any itemized or standard deductions are considered) for contributions made to an HSA during any month of the individual’s taxable year that the individual is eligible. The permitted deduction cannot exceed the sum of the “monthly limitations” for such months. In 2006, the monthly limitation for any month is 1/12th of the following amounts:

  1. For those with single coverage on the first day of the month, the lesser of the annual deductible under the HDHP or $2,700.
  2. For those with family coverage on the first day of the month, the lesser of the annual deductible under the HDHP or $5,450.

Funds in an HSA grow on a tax-deferred basis, and distributions from an HSA are tax-free so long as the funds are used for qualified (as defined by Section 213d of the IRC) health care expenses.

How does state tax treatment of HSAs differ from federal tax treatment?

HSAs (and the enabling legislation) are federal. As a federal program, each state decides whether to: a) comply with the federal guidelines, or; b) establish their own state guidelines regarding the tax treatment of HSAs. As a result, some income that may be tax-free at the federal level may not be tax-free at the state level.

Many states harmonize their tax treatment with the federal government. Those states include Arizona, Arkansas, Colorado, Connecticut, Delaware, Georgia, Hawaii, Idaho, Iowa, Indiana, Kansas, Kentucky, Louisiana, Maryland, Missouri, Mississippi, New York, Montana, Nebraska, New Mexico, Oklahoma, North Carolina, North Dakota, Pennsylvania, South Carolina, Oregon, Rhode Island, Virginia, Utah and Vermont.

Other states, however, treat HSAs differently from the federal government, at least for tax purposes. The following states have indicated that legislation must be passed at the state level before HSAs receive a tax benefit at the state level: California, Illinois, Maine, Massachusetts, Michigan, Minnesota, New Hampshire, New Jersey, Ohio, Washington DC, Wisconsin, West Virginia and Tennessee. New Hampshire and Tennessee do not tax income, but do tax dividends and interest. Alabama has not indicated their position regarding state-level tax benefits for HSAs.

Finally, some states are not affected by federal income tax guidance vis-à-vis HSAs: those states include Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming.

It should be noted that Medicare Health Savings Accounts, such as those offered through Medicare Advantage plans, have different tax regulations.

Finding Affordable Health Insurance in California

California – “The Golden State” – has held a certain mystique ever since the Gold Rush. The mild climate, beautiful landscape and a pervasive can-do attitude make this one of the best places to live on the planet. Perhaps that?s why entrepreneurs, adventurers, artist and free-thinkers from all over the world have decided to call California home. All residents of California are protected by a variety of state and local laws that make it difficult for insurance companies to totally refuse to write you a policy. The problem is, at what cost? Like anywhere else in the United States, it can be tough to find affordable health insurance here.

The good news is that there are lots of companies that do business here, and they compete fiercely. You can find plans and premiums in every color of the rainbow. The bad news is that the plethora of choices can make it difficult to make “apples-to-apples” comparisons between plans, much less choose the type of plan that might be best for your family or business.

One option is to contact carriers directly, and have one of their agents explain their various policies and pricing options. You can discuss your exact requirements and decide on the plans that best suit you. The problem with this approach is that you have to contact each insurance carrier separately, and on your own. which can extremely time-consuming.

Another option is to contact an insurance broker. Brokers typically represent several carriers at once, and after interviewing you they can cut through the confusion and just present you with plans that make the most sense for you. The downside of this is that sometimes it’s hard to discover the options that the brokers aren’t showing you. Brokers may be especially incented to sell you on one policy over another, because they get a bigger commission from that particular carrier. So it’s hard to tell if the broker really has your best interests at heart.

Requesting insurance quotes online also speeds up the whole process. You fill in a short online form with relevant details, choose a few options and a quote suited to your needs is displayed. Then it’s easy to make some changes to the options and see how that might affect your premium pricing. Even after you’re fairly sure of the type of plan, coverage and carrier you want, it’s still a good idea to go through a broker for the final purchase. They know the business inside and out, and can alert you to special deals that you might not have access to online.

Using Health Benefits for Competitive Advantage

The attractiveness of your benefits package can make the difference between pulling in star candidates or having to settle for average performers, especially when the labor market is tight. According a recent Value of Benefits Survey conducted by the Employee Benefit Research Institute (EBRI) and Mathew Greenwald & Associates, U.S. workers’ preferences for employee benefits haven’t changed much from a survey conducted four years ago. Health insurance still ranks as the most-valued benefit, with retirement savings plans (like 401k plans) the next most valued, while benefits such as stock options rank very low. Consequently, small and medium-sized business owners are increasingly using health benefits packages to attract and retain top talent.

Before you make any decisions about your benefits plan, research your environment thoroughly to make sure you offer competitive benefits that make sense. Similar companies compete for similar pools of employees ? if your direct competitors offer full benefits, then you probably should as well. According to the 2005 SHRM survey of employer benefits, 97% of companies offered some form of health insurance, and the same percentage offered prescription drug coverage. About eight percent of organizations offer vision insurance, while only 42% cover part-time employees’ health needs.

Though the 2001 EBRI/MGA Value of Benefits Survey found that seventy-seven percent of employees reported that the benefits a prospective employer offers are “very important” in their decision to accept or reject a position, not all benefits are equally important to every candidate. Virtually all candidates are focused on relocation and assistance in transitioning to their new community, but otherwise, benefits can be highly individual. Health care may be very important to someone who is single or the sole breadwinner, whereas a married candidate already covered under a spouse’s plan might not care as much about it.

Obviously, employees might prefer health plans that the employer fully pays for, but rising costs make these traditional plans out of reach for many small business owners. With today’s new generation of plans, however, even the smallest businesses can offer valued health packages to employees. The trend is clear: companies are encouraging employees to shoulder more of the costs of health care or at least plan better for them.

One sign of this is the growth of medical flexible spending accounts: 71 percent of companies offered them in 2004, but now over 78 percent do. Another harbinger – a full twelve percent of employers offer the new “consumer-driven” health care plans, which combine a high-deductible insurance plan with a tax-free health savings account. These plans were virtually nonexistent just a few years ago.

So don’t be afraid: go ahead and ask employees to share insurance costs. While asking employees to pay for part of their healthcare might seem off-putting, it can actually help employees value their healthcare plans more. You can also be more competitive as a business by managing costs through a phased approach. This is where employees share the cost of their benefits on a decreasing basis as they build seniority. in other words, more loyal employees pay less towards their health insurance.

Remember: differentiation is key to competitiveness. Even when particular benefit elements are seen as desirable or almost universally offered, employers can still differentiate their programs.

Related: Health Jobs with Benefits


From Wikipedia, the free encyclopedia.

Insurance is the business of providing protection against financial aspects of risk, such as those to property, life, health and legal liability. It is one method of the overall concept known as risk management.


In insurance, the insured makes payments called “premiums” to an insurer, and in return is able to claim a payment from the insurer if the insured suffers a defined type of loss. This relationship is usually drawn up in a formal legal contract, also known as a policy. The contract will set out in detail the exact circumstances under which a benefit payment will be made and the amount of the premiums.

In one classic example of insurance, a ship-owner insures a ship and receives payment if the ship is damaged or destroyed. This example is one of the earliest uses and developments of concepts like insurance. Interestingly, ships are now more often insured through risk pooling and spreading organizations such as Lloyd’s of London because the loss of a large ship going down is too great for one insurer to accept.

In the case of annuities, such as a pension, similar concepts apply, but in some sense in the reverse. When applied to annuities, the terms risk and loss are somewhat different from traditional insurance as they concern the chances of living beyond life expectancy and the need for income during the period between annuitization and death.

Insurance attempts to quantify risk by pooling together a large number of risks. This makes use of the law of large numbers. As applied to insurance, this means that the greater the number of similar risks, the greater accuracy with which insurers can estimate the overall risk.

For example, many individual people purchase health insurance policies and they each pay an enormous monthly or yearly premium to an insurance company. When a policyholder gets ill, the insurance company provides money to cover medical treatment. For some individuals the insurance benefits may total far more money than they have ever paid into the insurance policy. Others may never make a claim. When averaged out over all of the people buying policies, value of the claims even out. Insurance companies set their premiums based on their calculated payouts. They plan to take in more money (in premiums and in profit from the float, see below) than they pay out in the end to cover expenses. For-profit insurance companies set their rates to make a profit rather than to break even.

Insurance companies also earn investment profits, because they have the use of the premium money from the time they receive it until the time they need it to pay claims. This money is called the float. When the investments of float are successful, they may earn large profits, even if the insurance company pays out in claims every penny received as premiums. In fact, most insurance companies pay out more money than they receive in premiums. The excess amount that they pay to policyholders is the cost of float. An insurance company will profit if they invest the money at a greater return than their cost of float.

Insurance can also be thought of as a wager or bet that executes over the policy period. The insurance company bets that you or your property will not suffer a loss while you put money on the opposite outcome. The difference in the fees paid to the insurance company vs the amount they can be held liable for if an accident happens is roughly analogous to the odds one might expect when betting on a racehorse, i.e 10:1. For this reason, a number of religious groups including the Amish avoid insurance and instead depend on support provided by their communities when disasters strike. In closing, supportive communities where others will actually step in to rebuild lost property, this arrangement can work. Most societies could not effectively support this type of system.

History of insurance

Insurance has been an institution of human society for thousands of years, having been practiced by Babylonian traders as long ago as the 2nd millennium BCE. Eventually it was given legal mention in the Code of Hammurabi, and practiced by early Mediterranean sailing merchants. The Greeks and Romans had “benevolent societies” which acted to care for the families and funeral expenses of members upon death. Guilds in the middle ages served a similar purpose. The Talmud deals with several aspects of insuring goods. Insurance became much more sophisticated in post-Renaissance Europe, and specialized varieties developed.

In America, Benjamin Franklin helped to popularize and make standard the practice of insurance, particularly against fire. The 19th century saw a rise in the government regulation of insurance, and the 20th century saw further specialization and, in the United States, a bit of deregulation that allowed other financial institutions, such as banks, to offer insurance. The ever-increasing ability of science to predict catastrophes of any measure or variety continues to affect the way insurance is conducted.

Types of insurance

  • Automobile insurance, also known as auto insurance, car insurance and in the UK as motor insurance, is probably the most common form of insurance and may cover both legal liability claims against the driver and loss of or damage to the vehicle itself.
  • Property insurance provides protection against risks to property, such as fire, theft or weather damage. This includes specialized forms of insurance such as fire insurance, flood insurance, earthquake insurance, home insurance or boiler insurance.
  • Casualty insurance insures against accidents, not necessarily tied to any specific piece of property.
  • Liability insurance covers legal claims against the insured. For example, a doctor may purchase insurance to cover any legal claims against him if he were to be convicted of a mistake in treating a patient.
  • Financial loss insurance protects individuals and companies against various financial risks. For example, a business might purchase cover to protect it from loss of sales if a fire in a factory prevented it from carrying out its business for a time. Insurance might also cover failure of a creditor to pay money it owes to the insured. Fidelity bonds and surety bonds are included in this category.
  • Title insurance provides a guarantee on research done on public records affecting title to real property, usually in conjunction with a search done at the time of a real estate transaction, such as a sale, or a mortgage.
  • Health insurance covers medical bills incurred because of sickness or accidents.
  • Life insurance provides a benefit to a decedent’s family or other designated beneficiary, usually to make up for their loss of his or her income.
  • Annuities provide a stream of payments and are generally classified as insurance because they are issued by insurance companies and regulated as insurance. Annuities and pensions that pay a benefit for life are sometimes regarded as insurance against the possibility that a retiree will outlive his or her financial resources. In that sense, they are the opposite of life insurance.
  • Credit insurance pays some or all of a loan back when certain things happen to the borrower like unemployment, disability, or death.
  • Terrorism insurance
  • Political risk insurance can be taken out by businesses with operations in countries in which there is a risk that revolution or other political conditions will result in a loss

A single policy may cover risks in one or more of the above categories. For example, car insurance would typically cover both property risk (covering the risk of theft or damage to the car) and liability risk (covering legal claims from say, causing an accident). A homeowner’s insurance policy in the US typically includes property insurance covering damage to the home and the owner’s belongings, liability insurance covering certain legal claims against the owner, and even a small amount of health insurance for medical expenses of guests who are injured on the owner’s property.

Potential sources of risk that may give rise to claims are known as perils. Examples of perils might be fire, theft, earthquake, hurricane and many other potential risks. An insurance policy will set out in details which perils are covered by the policy and which are not.

Types of insurance companies

Insurance companies may be classified as

  • Life insurance companies, who sell life insurance, annuities and pensions products.
  • Non-life or general insurance companies, who sell other types of insurance.

In most countries, life and non-life insurers are subject to different regulations, tax and accounting rules. The main reason for the distinction between the two types of company is that life business is very long term in nature – coverage for life assurance or a pension can cover risks over many decades. By contrast, non-life insurance cover usually covers shorter periods, such as one year.

Companies may sell both life and non life insurance, in which case they are sometimes known as composite insurance companies.

Insurance companies are also often classified as either mutual or stock companies. This is more of a traditional distinction as true mutual companies are becoming rare. Mutual companies are owned by the policyholders, while stockholders, (who may or may not own policies) own stock insurance companies.

Reinsurance companies sell insurance cover to other insurance companies. This helps insurance companies to spread their risks, and protects them from very large losses. The reinsurance market is dominated by a few very large companies, with huge reserves.

There are also companies which are known as Insurance Brokers. Like a mortgage broker, these companies are paid a fee by the customer to shop around for the best insurance policy amongst many companies.

Life insurance and saving

As well as paying out a sum of money on death, many life insurance contracts also pay out a sum of money after a given time (in which case it is known as an endowment policy), and may also pay out a cash value if the policy is cancelled early. In many countries, such as the US and the UK, tax law provides that the interest on this cash value is not taxable under certain strict circumstances.

This leads to widespread use of life insurance as a tax-efficient method of saving as well as protection in the event of early death. Wealthy individuals buy life insurance policies as a means for avoiding income taxes and estate taxes.

If the tax benefit exceeds the fees charged by the insurance company for maintaining the policy, then the policy serves as a life insurance tax shelter. There is much controversy surrounding this practice, and the financial industry is deeply divided about whether or not these practices work as advertised.

Criticisms of the insurance industry

Insurance insulates too much

By creating a “security blanket” for its insureds, an insurance company may inadvertently find that its insureds may not be as risk-averse as they should be (since they assume they fallback upon their insurance policy). To reduce their own financial exposure, insurance companies have contractual clauses that remove their obligation to provide coverage if the insured engages in some kind of behavior that grossly magnifies their risk of loss or liability.

For example, liability insurance providers do not provide coverage for liability arising from intentional torts committed by the insured. Even if a provider was irrational enough to try to provide such coverage, it is against the public policy of most countries to allow such insurance to exist, and thus it is usually illegal.

Lack of knowledge of policyholders

Insurance policies can be complex and some policyholders may not understand all the fees, regulation and coverages included in a policy. As a result, people could buy policies at unfavorable terms. In response to these issues, governments often make detailed regulations that set down minimum standards for policies and govern how they may be advertised and sold.

Many individuals purchase policies through an insurance broker. The broker can councel the policyholder on which coverage to purchase and limitations of the policy. A broker generally holds contracts with many insurers which allows the broker to “shop” the market for the best rates and coverage possible.


Location is one of the variables used to set rates. Insurers are also starting to use credit “scores”, occupation, marital status, and education level to set rates. Many consider these practices to be “unfair” and even racist. An interesting refutation to this is that the job of an insurance underwriter is to properly categorize a given risk as to the likelihood that the loss will occur. Any factor that causes a greater likelihood of loss should in theory, be charged a higher rate. This is a basic principle of insurance and must be followed for insurance companies or groups to operate properly, even for non-profit groups. Thus, discrimination of potential insureds by legitimate factors is central to insurance. Therefore the only thing that can be considered legitimately “unfair” are practices that discriminate against a given group without actual factors that show that the group is a higher risk.

Health insurance

Health insurance is one of the most controversial forms of insurance because of the conflict between the need for the insurance company to remain solvent versus the need of its customers to remain healthy, which many view as a basic human right. This conflict exists in a liberal healthcare system because of the unpredictability of how patients respond to medical treatment. Suppose a large number of customers of a particular insurance company were to contract a rare disease costing 100 million dollars to fight for each patient. The insurance company would be faced with the choice of either charging all its future customers astronomical premiums (thus losing customers and going out of business), paying all claims without complaint (thus going out of business) or fighting the customers in an attempt to deny the costly treatment (thus outraging patients and their families, and becoming a target for lawsuits and legislation).

Many countries have made the choice to avoid this important conflict by nationalizing the health industry so that doctors, nurses, and other medical workers become state employees, all or partly funded by taxes; or setting up a national health insurance plan that all citizens pay into with tax payments, and which pays private doctors for health care. These national health care systems also have their problems. Many countries have citizen groups which protest bureaucracy and cost-cutting measures that sometimes unduly delay medical treatment.

In the United States, health insurance is made more complicated by Federal Medicare/Medicaid programs, which have had the unintended consequence of determining the price of medical procedures. Many suspect that these prices are set independently of medical necessity or actual cost. A physician who refuses to accept a Medicare/Medicaid payment will be banned from accepting any such payments for a number of years, regardless of the reason for rejecting the payment or the amount offered. In either case, this means that private insurers have little incentive to pay more than the government does.

Some common complaints about private health insurance companies are discussed in the health insurance article.

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