The Importance of Insurance for People’s Safety Essay

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Introduction

Insurance is crucial for people’s safety and well-being. There are different types of insurance, but each aims to protect different spheres of human life, such as qualified and nonqualified, benefit and contribution plans, and health insurance programs. Each of the programs is different but important for people. Still, each insurance plan is integral to human life, responsible for different spheres and protecting employees.

Discussion

Employers can provide their employees with qualified and nonqualified retirement plans, which are subject to different tax and regulatory frameworks. Qualified retirement plans comply with specific regulations established by the Internal Revenue Service and are eligible for preferential tax treatment (The Investopedia Team, 2020). These plans include 401(k)s, 403(b)s, and traditional pension plans (The Investopedia Team, 2020). Under a qualified plan, the employer has the option to make contributions to the plan on behalf of their employees, and these contributions are tax-deductible for the employer (Bearss, 2013). In addition to the employer’s tax deduction, the employee also enjoys a tax benefit in qualified plans, as the contributions are deducted from their taxable income before taxes are applied. Conversely, nonqualified plans are retirement schemes that do not satisfy the criteria established by the IRS for qualified plans (Bearss, 2013). These plans include deferred compensation plans, executive bonus plans, and other similar arrangements. In a nonqualified plan, both the employee and employer make contributions after taxes have been paid. Consequently, there are no instant tax benefits for either party. Hence, qualified and nonqualified plans have differences in taxes and regulations.

Defined benefits and defined contribution plans differ in how the benefits are determined. A defined benefit plan refers to a retirement scheme that guarantees to provide a predetermined amount of benefits to the employee when they retire (The Investopedia Team, 2023). The employer is responsible for ensuring sufficient funds are in the plan to pay the promised benefits to employees (The Investopedia Team, 2023). A defined contribution plan is a retirement strategy in which the company makes a predetermined financial commitment to the employee’s personal account. (The Investopedia Team, 2023). The employee manages the investments within the account and bears the investment risk. The benefit amount at retirement is determined by the contributions made to the account and the investment returns earned on those contributions (The Investopedia Team, 2023). Thus, the key contrast between defined benefit plans and defined contribution plans lies in the way the benefit amount is determined.

The three basic types of managed care health insurance plans are HMO, PPO, and POS, which are essential for employees as they represent different options for healthcare coverage. Typically, Health Maintenance Organization (HMO) plans mandate that the policyholder selects a primary care physician who will be responsible for overseeing all of their healthcare necessities (ForeignBorn, n.d d.). Preferred Provider Organization plans allow the insured to visit any healthcare provider within a network of preferred providers at a discounted rate (ForeignBorn, n.d d.). Nonetheless, the policyholder has the option to receive medical attention outside of the provider network, but it may entail paying a greater cost-sharing portion. Point of Service (POS) plans to merge the characteristics of both Health Maintenance Organizations (HMOs) and Preferred Provider Organizations (PPOs). (ForeignBorn, n. d.). The cost-sharing amount for care outside the network may be lower than for PPOs. Understanding the different types of managed care plans can help employees choose the plan that best fits their needs and budget. Hence, it is important to note that there exist three fundamental categories of health insurance policies that provide distinct choices for healthcare coverage.

Conclusion

Overall, insurance plans are crucial for financial stability throughout one’s life, and in the USA, there are several options available to support employees even after they retire. Especially significant is the health care insurance plan, which consists of three main types. These variety of programs are essential for employees to provide them with choices and a deep understanding of insurance. Also, such a variety of insurance plans will help employees to have a life without financial problems.

References

Bearss, J. (2013). Qualified vs non-qualified retirement plans: what’s the difference. Follow the Money. Web.

ForeignBorn. (n. d.). Types of health insurance plans in the US: HMO, POS, PPO. Web.

The Investopedia Team. (2020). Web.

The Investopedia Team. (2023). . Web.

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IvyPanda. (2024, February 26). The Importance of Insurance for People’s Safety. https://ivypanda.com/essays/the-importance-of-insurance-for-peoples-safety/

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"The Importance of Insurance for People’s Safety." IvyPanda, 26 Feb. 2024, ivypanda.com/essays/the-importance-of-insurance-for-peoples-safety/.

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IvyPanda. (2024) 'The Importance of Insurance for People’s Safety'. 26 February.

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IvyPanda. 2024. "The Importance of Insurance for People’s Safety." February 26, 2024. https://ivypanda.com/essays/the-importance-of-insurance-for-peoples-safety/.

1. IvyPanda. "The Importance of Insurance for People’s Safety." February 26, 2024. https://ivypanda.com/essays/the-importance-of-insurance-for-peoples-safety/.


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IvyPanda. "The Importance of Insurance for People’s Safety." February 26, 2024. https://ivypanda.com/essays/the-importance-of-insurance-for-peoples-safety/.

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