2011-02-08T07:57:00.000-08:00

In law and economics, insurance is a form of risk management primarily used to hedge against the risk of a contingent, uncertain loss. Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for payment. An insurer is a company selling the insurance; an insured, or policyholder, is the person or entity buying the insurance policy. The insurance rate is a factor used to determine the amount to be charged for a certain amount of insurance coverage, called the premium. Risk management, the practice of appraising and controlling risk, has evolved as a discrete field of study and practice.

Health insurance, like other forms of insurance, is a form of collectivism by means of which people collectively pool their risk, in this case the risk of incurring medical expenses. The collective is usually publicly owned or else is organized on a non-profit basis for the members of the pool, though in some countries health insurance pools may also be managed by for-profit companies. It is sometimes used more broadly to include insurance covering disability or long-term nursing or custodial care needs. It may be provided universally through government as a feature of social solidarity, as is typical in many industrial countries, or as form of government charity such as the United States Medicaid program. It may be purchased privately on a group basis (e.g., by a firm to cover its employees) or purchased by an individual for himself or his family. In each case, the covered groups or individuals pay a fee, premium, or tax, to help protect themselves from health care expenses.

A health insurance policy is a contract between an insurance company and an individual or his sponsor (e.g. an employer). The contract can be renewable annually, monthly or be lifelong. The type and amount of health care costs that will be covered by the health insurance company are specified in advance, in a member contract or "Evidence of Coverage" booklet. The individual insured person's obligations may take several forms:^[8]

INSURANCE