We all know that one of the most difficult parts of getting insurance is trying to figure out what kind of insurance deductibles that you need. It would be nice to not have to pay much out of pocket if something were to happen, but on the other hand you want a low premium, so you would rather raise your deductible to save.
It really comes down to figuring out exactly how much you can afford and what your chances are of having to hit that deductible for any given amount of time. Lets use an example:
I recently became self-employed and needed to get my own health insurance. The plans that I was looking at ranged anywhere from $50 a month to $500 a month. For starters, $500 a month was just too high for me. I really don’t need that comprehensive of coverage. After all, I am a single, young healthy male. I only really go see the doctor if something is terribly wrong. I looked at the cheaper plans, and noticed that my deductible would be $4k per year. This means I would pay the first four thousand dollars of my medical expenses in any given year. This doesn’t sound great, but you must remember how fast medical expenses can pile up. I recently had to have knee surgery, and the total bill after doctor visits, physical therapy, surgery, etc. came to be around $20k. I was out the $4k, but I saved a total of $16k just by having insurance.
My reasoning went like this: I can afford to be out $4k per year. That is the absolute worst-case scenario. If something terrible happened and my hospital bill was a million dollars, my liability would be limited to $4k no matter what. So I went with the 4k deductible plan. I saved up $4k in my Health Savings Account, and just let it sit there, earning interest each month. I have a very low monthly premium for my insurance ($67 for medical and dental), and I am covered in any worst-case scenario since I have the $4k ready to spend on my deductible.
Now, lets say I knew I would be going to the doctor a whole lot (chronic illness, planned pregnancy, etc.). If I knew I would hit that deductible every year, it might make sense to pay a higher premium and get the lower insurance deductible. It would make sense to see how much extra you are paying on your premium per year to have a lower deductible. If you are paying $1k per year more to have a $1k lower deductible, it wouldn’t really make any sense…
Finally, you want to look at how much deductible you can afford. I made the decision that I would always have $4k in my health savings as a just-in-case fund. Worst case, I lose all the money in that account. However, if you are scraping by, living paycheck to paycheck, you might not even be able to foot a $4k bill. In this case, you might want to pay the extra couple bucks to give yourself a deductible that you can afford. It doesn’t make any sense to have insurance if you are going to have to file for bankruptcy
either way.
Choosing the right insurance deductibles may not be easy, but make sure you look at all the options and make an educated decision. Health Insurance.
