10 Essential Ingredients of a Good Health Insurance Plan

This checklist of ten policy essentials provides a great guide to getting the most inexpensive plan that covers all your needs.

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The search for the best coverage at the lowest price starts with comparing as many plans as possible from providers in your area.

To choose among the hundreds of plans available to you, use our fast and free comparison service to get quotes from major insurers in your state:

1. Good ratings

Good ratings are especially important if you are purchasing your policy from a new or unfamiliar company. Of course, it is always wise to check out every potential provider's health insurance ratings to ensure you are dealing with a valid and trustworthy business.

Remember, before insurers agree to supply anyone with health insurance, they investigate every applicant and their background to protect themselves from fraud. You should put them to the test as well. Look for insurer and health insurance ratings through A.M. Best, Moody's, or Wiess rating agencies. (eHealthInsurance does this for you, free, before you apply for your free quote.)

2. The Lifetime Payout

In the event of a catastrophic illness, your policy needs to provide a sufficient amount of health care coverage. However, to protect itself from ever having to pay too much, your insurer limits the lifetime payout. Therefore, lifetime payout is the maximum amount of reimbursement the health insurance company provides during your lifetime.

A $1 million lifetime payout is a good rule of thumb. Anything less and you run the risk of prematurely depleting the entire compensation for health care costs available to you, while aiming for a higher limit might make finding an inexpensive health insurance plan too difficult.

3. Largest deductible and co-payment you can afford

Setting a high deductible and high co-payment will lower your premium payments significantly. Although this will raise your out-of-pocket medical expenses, remember that the higher your deductable and co-payments are, the lower your premium will be. The question you want to ask yourself is how much can you afford to pay out-of-pocket in an unforseen medical emegency?

4. Reasonable out-of-pocket limit

This policy provision limits your out-of-pocket payments over the course of a year. It is especially important in the event of a serious illness, and we recommend that you consider only policies that carry one. However, it's wise to consider that setting a low maximum will increase the amount you pay in premiums. Try to establish a reasonable out-of-pocket maximum to balance risk with cost.

5. Waiver of premium provision

A waiver of premium provision allows you to skip premium payments during lengthy illness. Although this potential aspect of your health insurance policy is not absolutely necessary, the provision is helpful, sometimes vital, should an illness prevent you from working for an extended period of time.

6. Renewable provision

The renewable provision is an absolute must when it comes to finding your perfect health insurance policy. This provision guarantees your health insurance plan can not be canceled because you become ill. You may or may not be required to continue paying your premiums while ill, depending on whether or not you health insurance plan includes the waiver of premium provision, but you won't lose your coverage right when you need it most.

7. Timely coverage of pre-existing conditions

Often insurers require a waiting period before covering the health care costs for pre-existing health problems. Although it is standard for them to assign a waiting period, it should never be over a year, and my be as little as three months. After picking through all the health insurance plans that satisfy your other requirements, check to see that the waiting period is not more than a year.

8. Emergency coverage

Another must for your health plan is coverage of your emergency medical services. In the past, some managed care plans were criticized because they required the primary care physician to approve emergency health care. This tactic may save money, but emergency care shouldn't be jeopardized. Read through your health insurance plan paying special attention to the definition of emergency and verify with the health insurance company what is exactly covered. If you have access to health insurance ratings, take note of this factor.

9. Few prerequisites

Prerequisites are requirements you must first fulfill before receiving medical attention. Health insurance plans with too many prerequisites are too restrictive. A policy with a few prerequisites is fine - it's how the company survives (and how you get a low cost health insurance policy), but good health care should never be sacrificed. Deciding on what is too many is a bit subjective, but if it seems to you that the policy requires you to jump through too many hoops, than you may want to look elsewhere (or simply at a slightly different policy from the same insurer).

10. Use online resources to find the best health insurance plans

Our favorite rule! The internet is a great source for health insurance ratings, learning centers, and comparisons, but it's a great place to shop too. You won't feel pressured into buying a "hard sell" policy, and you can take your time and really comparison shop for the best low cost health insurance policy.

We have two great partners who will help you further:

eHealthInsurance lets you compare all managed and fee-for-service plan side-by-side, and even gives you the financial ratings up front. Learn more about the many health insurance providers they represent or get an instant online quote with comparisons now.

Or, if you prefer a more personal approach, visit NetQuote, a service that will put you in touch with several agents who compete to provide you with the lowest premiums and best service possible.


Next: Policy exclusions: what your insurer will not cover.