Why do you need it?

Health care, especially in emergency situations, can be too expensive for most people to afford on their own. But foregoing hospital and physician care is not a reasonable solution. The sound alternative is medical insurance.

Medical insurance essentially reimburses you for a large portion of your health care costs when they arise, making the care more affordable to you. Although insurance can be expensive, the cost of treating an unforeseen illness or injury is likely to be much more.

The bottom line --- medical insurance offers security.

What kind of coverage do you need?

Indemnity/Traditional

Indemnity insurance, the traditional fee-for-service health care, has gradually become less prevalent as managed care becomes the norm. However, if you value flexibility in care and don't mind spending a little extra money for full coverage, it may be the best policy for you.

Fee-for-service health care offers you unlimited choice. You control your choice of physician and facility, from primary caregiver to specialist, surgeon and hospital. Flexible coverage also means immediate treatment for medical emergencies or unexpected illness.

But fee-for-service health plans do have care restrictions. They do not traditionally cover preventive medicine, so check-ups, office visits and shots (among a few other services) are your responsibility. This can make indemnity insurance impractical for a large family that requires a lot of routine visits and preventive care.

Choice does not come cheap. While it's hard to predict the annual cost of health care under an indemnity insurance plan, there are a few costs that come pretty standard:

A monthly health insurance policy premium.
A yearly deductible before your health insurance begins to contribute.
A per-visit co-insurance, or percentage of health care expenses.
As a rule, health care services not covered by your health insurance policy (like check-ups) also don't count toward satisfying the deductible.

Of course, not all fee-for-service health plans are created equal. There are various levels of coverage available.

There are three kinds of indemnity insurance coverage:

Basic health insurance
Major Medical insurance
Comprehensive insurance

Basic health insurance includes:

Hospital room and board and hospital care.
Some hospital services and supplies such as X-rays and medicine.
Surgery, whether performed in or out of the hospital.
Some doctor visits.

Major Medical insurance includes:

Treatment for long, high-cost illnesses or injuries.
In-patient and out-patient expenses.

Comprehensive insurance is a combination of the two. The cost of your plan will vary with the level of coverage. Major medical insurance, for example, though popular, can carry a hefty price tag.