[Life
Insurance 101 Series: This series features IMPACT posts that detail the breadth
of the industry’s reach and benefits provided to consumers.]
Great
pairs provide great things like:
·
great music (Lennon & McCartney);
·
great lunches (peanut butter & jelly);
·
financial protection (life & health insurance).
Each
component of these famous combos is distinctive.
John
& Paul’s differences have been well chronicled. Peanut butter and jelly’s
differences are clear. But life and health insurance are sometimes
confused.
The
graphic below highlights key differences from the perspective of a whole life policy and
a comprehensive health insurance plan, perhaps one offered by an employer or
one individually purchased in the marketplace. (Different policies would
require changes to this graphic).
Underwriting,
which is the process of evaluating an application and setting a price, is the
key distinction.
Consumers
are evaluated only at the time of purchase for life insurance. Once issued
coverage, a company has limited, if any, ability to increase rates. That is why
life insurers seek each applicant’s consent to fully review their medical
record. They need to make decision about who to cover and set fair price that
reflects the applicant’s health and medical situation at that time.
Health
insurance rules differ. For example: The underwriting process tends to less
vigorous. Coverage is often mandatory. Policy premiums can be increased
annually if the insured group makes more claims than expected or if claims are
more costly than anticipated.
Neither
form of insurance is better than the other. They’re just different. Regulating
or examining the two as if they’re the same invites trouble.
Like
asking John to hit the high harmonies (That was Paul’s job)
Like
asking jelly to keep the sandwich bread dry (That’s peanut butter’s job — jelly
always in the middle).
You
just don’t want to go there.
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