As a consumer, I am always trying to make ends meet. So I am concerned that I don’t over-insure myself and my family. Some insurance is required by law, for example, car insurance. But do I need term life? Young families buy term life so that if something happens to one of the parents the children will be properly cared for and will be assured of a good college education. Do I need health insurance? Health insurance is only necessary if you get sick or injured, but we can never foretell that. So we do need health insurance.
One way to avoid becoming “insurance poor” is to take out health insurance with a high deductible. My advice is that we ask ourselves a question: “If I had a major medical catastrophe, how much money could I find to pay for it?”
If you have no problem finding $5,000 to pay the deductible in the case of a major catastrophe, then a $5,000 deductible is a good option. If you think you could only find $1,000 in a crisis, then $1,000 would be a reasonable deductible. People generally choose a deductible based on their ability to meet that deductible.
Many folks think that going with a high deductible saves a lot of money. You do save, but sometimes not so much. Let’s look at the hypothetical changes in annual premium for a 30-34 year old male based on various deductibles:
$250 deductible = $1,275
$500 deductible = $1,120
$1,000 deductible = $871
$2,500 deductible = $772
$5,000 deductible = $632
$10,000 deductible = $498
The largest saving of $249 comes between the $500 and $1,000 deductible. Going from $1,000 to $2,500 saves only $99, and from $2,500 to $5,000 only saves $140. In fact, going from $1,000 to $5,000 saves only $239 per year even though you have added $4,000 to the deductible. So increasing the deductible does not produce great savings.
Up to the present time, with all companies, the $1,000 deductible seems to be the most cost-efficient.
Doug Gulleson loves to scuba dive overseas and makes sure he always takes his Amex card AND international travel insurance policy. Visit Good Neighbor Insurance at www.overseashealthinsurance.com/short-term.asp for your next overseas trip health coverage and get a FREE quote or call one of our agents at 480-633-9500.