There are many ways to classify health insurance policies—by need satisfaction, renewal rights, payment mode, and marketing method—all of which have advantages in explaining policy provisions and coverages. Need satisfaction—income, treatment expenses and compensation for loss of ability—is used in this discussion since this classification method follows reasoning used in health programming—comparison of needs to resources available.

There is seldom immediate coverage with health insurance, even when the policy is issued and premiums paid. The period of delay between the date the policy is issued and the start of coverage is commonly termed the waiting period. Normally the waiting period for accident coverage is short, with longer delays for sickness, pregnancy and special conditions.

In addition to this waiting period, there is usually a delay for coverage of conditions for which previous treatment has been received, if the condition is not specifically excluded. Group plans cover preexisting ailments more readily than individually purchased health policies. Since 1996, there have been certain limitations on the types of preexisting conditions and the length of the waiting period that health insurers may impose.

Health insurance policy renewal provisions are typically revealed in the policy name. For example, a guaranteed renewable, non-cancelable hospital expense policy cannot be canceled by the insurer during the policy period (non-cancelable) and renewal is guaranteed to the insured, usually to a certain age or for a certain period of time. Few policies issued are cancelable, but many are renewable only at the option of the insurer. This option allows the insurer to up-grade policies in line with medical costs and to raise premiums as necessary.

The guarantee to renew may also include a guarantee of rates, in which case the premiums are usually much higher than other policies paying similar benefits. Typical health insurance premiums apply to age range rather than specific ages. Thus, rates for all males, between ages twenty-five to twenty-nine, for example are the same for a specific policy.

A growing form of insurance, not discussed in these pages is the supplemental health coverages. These policies fill in the gaps in other programs—private health plans which carry low benefits, state and local health plans and Medicare — allowing the person covered by such plans to have as of broad coverage as is generally available.

Disability income policies, a significant segment of health coverages, relate benefits to time rather than severity of illness. Most of these contracts provide a specific amount of money per week or month while the insured is unable to work due to a covered injury or sickness. Usually these policies provide for total disability, and some partial disability benefits are often offered. The extent of disability required for payment to be made is stated in the policy and generally varies from “unable to perform tasks of own occupation” to “hospital confinement.” Some forms pay additional amounts up to double, for hospital confinement periods.

Time, in addition to being the basis of coverage, is also used as a deductible in disability income policies. In order to eliminate minor disability claims and to discourage lingering, benefits are usually not paid until the period of disability reaches a certain optional length of time. This varies from a few days to as long as two years. The longer waiting period is offset with lower rates. This period, called the elimination period, generally is shorter for disability caused by accident than that resulting from sickness. It is not uncommon for accident benefits to be payable from the first day while typical elimination periods for sickness range from seven to ninety days. Occasionally, an elimination period will be retroactive, paying from the first day if the period of disability lasts a certain length of time or if the disability requires hospitalization. This provision is most often found in credit health or similar policies and adds materially to the cost of the coverage.

Benefits are payable for the period stated in the policy—from six months to lifetime—and, again, differ for sickness and accident. Accident benefits typically pay longer than sickness which are usually under five years and some contracts provide for termination of benefits after a certain time or age — ten or twenty years after the inception or age sixty-five. If the terminal age is sixty-five, policies sometimes specify that at least twelve months of benefits will be paid for any disability occurring in the final year. A few policies extend the period of indemnity if the injured person is engaged in an approved rehabilitation program.

Income limits are usually established for disability income policies so that a disabled insured receives only a portion of his normal salary, usually about 60 percent. Policy amounts are usually in hundreds of dollars per month, though some odd limit policies do exist.

Disability income is the most neglected form of health coverage as far as both the consumer and insurance producers are concerned. Only a small percentage of eligible insureds have this coverage and many of those who do not have disability coverage would purchase it, if properly offered to them.

The second classification of health insurance—medical expense coverage—is most familiar to insureds and includes many policy forms. This coverage is frequently provided to employees by employers and when not provided, is readily purchased individually.

Basic medical expense coverage is for medical expenses incurred while treating an injury or sickness. Hospitals, physicians, surgeons, anesthetists, nurses, x-rays and medicine costs are usually covered unless otherwise specified or limited. The amounts payable for specific sicknesses and injuries—tonsillitis, hernia, broken bones—are specified in the policy along with limits for miscellaneous charges.

In addition to plans for basic medical expense coverage, there is major medical expense insurance, a high limit medical expense health coverage. Major medical is frequently carried in conjunction with basic coverage. However, a number of major medical plans provide coverage which is a combination of both plans in a single policy. Major medical policies are designed to cover the kind of medical expenses that would bankrupt most insureds, the catastrophic injury or ailment, as contrasted to those medical expenses which can be planned and budgeted to some extent. The type of expenses covered are the same as those covered under basic medical, but there are seldom limits on specific medical treatments or ailments; just the policy limit.

Medical expense coverage, both basic and major, usually is purchased to provide benefits for the entire family. Disability income and accidental death and dismemberment policies normally are purchased only for the breadwinner(s). Benefits applying to dependents, while normally expiring when the child reaches age 18, sometimes are extended for single, full-time students to age twenty-two. A common provision allows dependents to buy similar insurance in the same company without proving insurability (proving that the person's health meets company underwriting standards).

Deductibles, frequently quite sizable, are common with major medical and usually reimbursement is for only 70 percent to 80 percent of covered expenses. This vertical sharing of covered expenses is called coinsurance in health insurance terminology. It is not a penalizing provision for carrying insufficient insurance as in property coverage. The coinsurance in the major medical policy simply puts some burden on the insured to be careful about treatment costs.

There are exceptions to the above statements about deductibles and coinsurance. Some forms are available with low deductibles, and with full coverage of expenses up to a certain amount, before the coinsurance percentage applies. Additionally, some forms with low deductibles specify that the policy pays nothing until after all other medical expense coverage is exhausted and the deductible paid. In still other policies, the deductible amount depends upon whether other insurance is available.

The majority of policies are broad in providing coverage. However, a few policies are available which are more limited, paying only certain types of expenses, such as hospital or surgical only and limited related expenses. In addition, there are some very limited forms which pay for certain ailments or accidents only; the so-called dread disease and travel accident policies are examples.

The last need category is compensation for loss of limbs, abilities, and life from accidents. Such policies attempt to pay for reduction in economic usefulness resulting from loss of an arm or leg, sight, hearing or death. Loss of limb must usually occur within ninety days of the accident to be covered. While many short-term (trip or travel) policies provide little more than this coverage, it is normally added as a rider (the life and health equivalent of an endorsement) to an income or expense payment policy.

Accidental death and dismemberment policies are usually written for a single face amount. This amount is payable according to a schedule in the policy—full benefits are paid for death or double loss of arm, leg or eye, and half benefits are paid for loss of one arm, leg or eye. When attached to a disability income policy, the schedule of benefits are paid in similar proportions but are a multiple of the disability income. While most policies pay only for loss of a major limb, some do make provision for payment for loss of minor limbs—fingers, toes, etc.

Accidental death and dismemberment benefits are sometimes payable in lieu of other benefits. When this option is made, the settlement is typically a lump sum payment. Insurers who offer this option will often reinstate other coverage if complications develop but there is nothing in the policy to assure that this will happen. The object in making such an offer is to encourage the injured person to rehabilitate himself. The lump sum payment removes financial worries, often a deterrent to voluntary rehabilitation.

Health insurance is programmed much like life insurance; an inventory of resources and benefits is taken and gaps in coverage filled. Programming has not been as widely accepted for health coverages as in life insurance, but insurers are beginning to offer more flexible plans to permit more sophisticated selling. Health insurance programming requires careful study of policy provisions and in this respect is much more complicated than life insurance programming. For producers who want to sell more health insurance, the best advice seems to be: know and understand your product.