US INSURANCE TYPES
Good insurance is the key to financial security in the United States. The state partially supports people who have health problems or have lost their jobs, but do not rely on the care of the government if you suddenly need help. Self-insurance of your health, life, car and real estate is the best way to take care of yourself.
Diagram 2. The structure of the American voluntary insurance market in 1G. 2008
Personal insurance, including life insurance
The US insurance market is the most developed insurance market in the world. Against the general background, personal insurance stands out, which has received sustainable development. It includes life insurance, annuity or pension insurance, as well as health and accident insurance.
Life insurance in the USA exists since 1830.
Now life insurance is a strategically important industry that provides investment in the economy and the solution of social problems of society. Since ancient times, life insurance has become more than just inventory, thanks to which people can save money, make a profit from investments, provide themselves with pensions and medical services.
For the United States, it is typical that life insurance companies often trust more than banks.
An important area of activity for American insurance companies is life insurance. Life insurance, offering a wide range of insurance guarantees and investment services, allows a person to solve a whole range of socio-economic problems. Conventionally, these tasks can be combined into two groups: social and financial. The implementation of the former allows overcoming the insufficiency of the state social insurance and security system. The implementation of the latter, on the one hand, contributes to an increase in personal income, and on the other hand, provides the necessary guarantees for a number of financial and credit operations.
The types of life insurance can be classified as follows: insurance without savings and accumulative forms of insurance (allowing to increase the volume of savings). Each of these species, in turn, has generated its own insurance products, and together they form all the variety of offers that takes place on the market.
In the USA, there are various types of personal insurance contracts:
- * Conventional life insurance provides for the payment of an insurance premium for the life of the insured person;
- * Life insurance, limited in duration, provides for the payment of the insurance premium for a certain period in installments or in the form of a lump sum payment of the entire required amount, after which the insurance policy is considered paid. The amount specified in the insurance contract is paid at a time in case of death of the insured person;
- * Insurance providing for the payment of the entire insurance amount upon the expiration of the number of years specified in the policy or in the event of the death of the insured person;
- * Contingent death insurance only for a certain short period of time (usually several years). A typical insurance case is the life insurance of the debtor for the duration of the loan;
- * The most popular type of insurance is universal insurance. Its essence lies in the fact that the amount of annual payments is determined independently by the person who takes out insurance. The company distributes these payments into three categories: one part goes to the accumulation of the main amount of payment in the event of the death of the insured employee, the other to a special bank account, which accrues interest, and the third to cover the company’s expenses. In annual reports, the company indicates which accounts and what amounts were received during the year.
Here I want to say a few words about another type of personal insurance – medical insurance. American healthcare is one of the largest industries in the country. In the United States, health insurance is voluntary and almost entirely provided by employers. Health insurance is the most common type of insurance at the place of work, but employers are not required to provide it at all. Not all US employees receive such insurance. Nevertheless, in the largest companies, health insurance is almost an integral condition, and in 2008 it covered about 75% of the US population.
There are many types of health insurance. The most common is the so-called compensatory insurance, or “service charge” insurance. Under this form of insurance, the employer pays the insurance company an insurance premium for each employee secured by the relevant policy. The insurance company then pays for the checks submitted by the hospital or other medical facility or doctor. This way the services included in the insurance plan are paid. Typically, the insurance company covers 80% of the cost of treatment, the rest must be paid by the insured.
There is an alternative – insurance of the so-called managed services. The number of Americans covered by this type of insurance is growing rapidly. In this case, the insurance company enters into contracts with doctors, other medical professionals, as well as with institutions, including hospitals. For the provision of all services provided by this type of insurance. Usually, medical institutions receive a fixed amount, which is paid in advance for each insured.
The differences between the two types of insurance described are very significant. In case of “service fee” insurance, the cost of services that are actually provided to patients is paid. When insuring “managed services”, medical institutions receive only a fixed amount per each insured patient, regardless of the volume of services provided. Thus, in the first case, health care workers are interested in attracting clients and providing them with various services, while in the second case they are more likely to refuse to appoint additional procedures for patients, at least they are unlikely to appoint them more than necessary.
Currently, the US government also pays more than 40% of health care costs under the main programs – Medicaid and Medicare. In accordance with the Medicare program, insurance is provided for all Americans over 65, as well as those who are approaching this age and who have serious health problems. The Medicare program is partially funded by a tax levied on all employees — both wage earners and employers. In general, this tax makes up about 15% of the income of employed Americans. In addition, Medicare is funded from general income tax revenues. The Medicaid program provides insurance for low-income Americans, mainly women and children from poor families. The program also pays for staying in nursing homes for those
However, there are many Americans who are not covered by any type of insurance. Many of them work, but employers do not provide them with health insurance. At the same time, these people are too young to meet the requirements of Medicare, do not belong to the category of unsecured, and the Medicaid program does not apply to them. The number of uninsured Americans, according to various estimates, ranges from 20 to 50 million people. (8-20% of the population).
The problem of medical care is one of the most acute in the USA. The cost of medicine is an astronomical amount – about 14% of the country’s GDP, while many US residents do not have the funds to pay for a visit to a doctor and purchase medicines.
In 2009, the average US citizen spent $ 5440 for medical purposes. US residents spent 9.3% more on medical purposes than in 2008. At the same time, the cost of buying medicines increased by more than 15% (all data from the government organization Centers for Medicare and Medicaid Services). For example, the cost of visiting a therapist, on average in the country, is $ 120. On average in the United States, per capita medical expenses (expenses that a US resident pays out of his own pocket or an insurance company pays) are $ 3,759 a year, according to the US Department of Commerce, the average American earned $ 28,272 in 2009.
More than 18,000 Americans die annually just because they do not have health insurance and are not able to pay for medical care. According to a study by the Institute of Medicine (a non-governmental organization conducting independent medical examinations for the US Congress), uninsured people who have breast cancer are 50% more likely to die than insured people. Also, victims of accidents, diabetics and hypertensive patients are much more likely to lose their lives.
Medicare is one of the federal health insurance programs for older people (over 65). Since 1972, the program also caters to people with disabilities. It consists of two main parts:
Part A – hospital insurance: payment for hospital services, some forms of home care.
Part B – Supplementary Health Insurance: Payments for doctor visits, outpatient services, and independent laboratory services.
Unlike compulsory hospital insurance, supplementary insurance is voluntary. In 2008, 34.6 million senior citizens and 6 million disabled people received assistance under Part A of the program. Part B services were used by 32.9 million and 5.2 million, respectively. In the same year, the average amount of reimbursed funds for servicing one patient under the hospital insurance program amounted to $ 3,689, and under the supplementary insurance program – $ 2,915. Medical care in the USA is one of the most expensive in the world, so Medicare is not able to cover 100% of the cost of medical services. In particular, a long stay in a hospital is not fully paid, dental services, eye tests, and glasses are not paid.
Medicaid is designed to provide health care to low-income people with incomes below the poverty line. In 2008, this program served 44.3 million people. But not every American whose income is below the poverty line can be included in this program. Medicaid is distributed to family members with children, pregnant women, the elderly, the blind, the disabled, as well as people suffering from certain diseases (tuberculosis, some forms of cancer). As with Medicare, the program does not cover 100% of the cost of treatment. In addition to these two federal programs, there is also a private health insurance market and a variety of local, municipal and county programs.
However, out of the attention of all these types of health insurance is a large part of the country’s population. Approximately 44 million Americans do not have health insurance, and 77 million have so-called “intermittent insurance”, i.e. in certain periods they do not have any (for example, in case of loss of work).
Imperfection of the health insurance system directly and indirectly affects all residents of the country. And the matter is not only in the social insecurity of a large part of the population. For example, if a patient who does not have health insurance is admitted to the hospital, the hospital does not have the right to refuse service. The costs of treating such a patient in a hidden form are redistributed between patients with insurance. This, in turn, leads to an increase in the cost of insurance. Every year, authorities of various levels are forced to spend up to $ 30 billion to cover the expenses of the poor, about $ 5 billion more, are given to them by doctors, who often agree to provide medical care for free. However, this does not reduce the severity of the problem.
Americans are serious about their health. On the one hand, insurance companies protect their clients from unprofessional medical care, on the other hand, Americans trust their doctors and do not buy medicines without the recommendation of a specialist.
It should be noted that in the USA all types of property insurance are legally voluntary. However, the prevailing practice, for a number of reasons why insurance of certain types of risks is a public necessity, often leads to the fact that the conclusion of insurance contracts becomes a necessity. Consider the main types of property insurance.
Car insurance (car insurance) is a mandatory type of insurance in the vast majority of US states. An uninsured car in them simply will not be registered. The very concept of “compulsory insurance” was born in America at the dawn of the twentieth century and has improved over the years.
Today, car insurance is governed by the laws of each state individually. Only in New Hampshire, Tennessee and Wisconsin is it optional. The differences in the laws of the rest of the states are reduced mainly to the types of compulsory insurance adopted there, as well as to the minimum insurance coverage.
In the vast majority of states, it is impossible to buy a car without car insurance – they simply will not sell it to you. If you don’t worry about this beforehand and come to buy a car, you will be offered to conclude an agreement and get an insurance policy from the nearest insurance company.
There are many insurance companies in America that offer a large number of different insurance schemes. At the same time, they take into account the age of the motorist, the area of the city where the car is kept at night, the approximate daily mileage, the main purpose of using the car (business or entertainment), how many traffic violations were observed for five years, car make and year of manufacture, and much more. All these data are used to calculate the optimal size of insurance coverage and the corresponding daily insurance premium.
Property insurance also includes real estate insurance (home insurance). It provides insurance compensation for damage caused to real estate for any reason and under any circumstances. This type of insurance is often also applied to household items, home appliances, other movable property located in the insured object.
Home insurance in the US is the second in terms of insurance premiums, second only to automobile insurance.
In the United States, insurance policies have a high degree of harmonization for insured risks. Across the country, only seven major types of policies are used. From these standard tools, individual homeowner insurance coverage is collected. Common additional conditions put forward by the policyholder are usually the requirement of accounting for inflation, which gives a slight increase in the cost of the policy, as well as a deductible, that is, the minimum level of loss that the policyholder covers on his own. The most common franchises are $ 250, $ 500, and $ 1,000. The franchise is very attractive to the insured, because it allows you to reduce the insurance rate by 20-30%.
In addition to the house, detached buildings can be insured: a garage, a swimming pool, etc., within 10% of the value of the house, and green spaces – up to 5% of the value of the house.
There is a separate type of property insurance designed for tenants. It provides compensation for damage caused to rental property and movable property. Thus, the tenant will not have to pay the landlord the damage caused by himself or another person during transportation, for example, to personal items (baggage during transportation), including jewelry, furs from spoilage when worn in a home environment and other circumstances .
Home insurance, which is used as a working room, for example, by small entrepreneurs or persons with free professions, is carried out at other rates and policies (Small Business Insurance). The reason for this is the greater saturation of such housing with social devices and appliances, as well as the more free third-party access to such office apartments. Insurance companies carefully monitor the nature of the use of insured housing, refusing to pay to “violators of the convention”.