Health (Medical Expense) Insurance

 


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Issues

Functionally, medical expense insurance pays for health care received for treatment of injury or illness. Strategically, it performs two functions:

  1. It provides access to desired medical treatment outside of that which is available from the public health services. Often non-public health care providers will not agree to treat those without medical expense insurance.
  2. It provides protection of accumulated assets that would be subject to liquidation to pay debts arising from uninsured medical expenses.

As you can see, health insurance is very important for the average person to have on themselves and their loved ones. The real issue that keeps many from obtaining the health insurance they need is the monthly premium cost. This is usually because we are trying to buy, or insurance agents are trying to sell, too much insurance. And by that we mean insurance with a low deductible.

Strategy

Health insurance should be purchased to protect against the expenses of catastrophic injury or illness, not to pay for regular health maintenance. Payment for regular health maintenance should be the responsibility of the individual. Following is a table showing the difference in costs for different annual deductibles. The quotes were for exactly the same policy, (on a 43-year old non-smoking male living in Florida), from the same company, obtained at the same time:

Annual Deductible Monthly Premium Annual Premium
$250 $132 $1,584
$500 $119 $1,428
$1,000 $109 $1,308
$2,500 $74 $888
$5,000 $54 $648

By changing from a $250 to $2,500 annual deductible, the annual premium decreases by 44% or $696 per year. It takes only 39 months of premium savings to save the $2,250 difference in deductibles. Therefore, you should obtain a low deductible policy only if you expect to be hospitalized more frequently than every 39 months (3¼ years).

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