Today we want to talk about insurance … just for the health of it!
Health insurance is a significant expense. If you’re fortunate enough to be part of a group, your company is probably paying a good portion of the cost. However, companies are increasingly asking their employees to bear a bigger share of the total cost.
Of course, if you’re self-employed, you have to pay it all. This really hits your budget in either case and, as we look to the future, it appears it will occupy an ever larger share.
I used to sell insurance years ago so I’m familiar with that side of it. I also approved our group plans when I was in business before Bigg Success.
When we started Bigg Success, it was an eye opener for me. I went from being an employee with group insurance to being self-employed buying individual coverage. I saw the full cost, not just my share of it. I was amazed at the array of choices. And I couldn’t get some of the coverage I really liked under my group plan.
Obviously, your age and your health are two major factors in the cost. The other key factors are:
Your deductible. This is the first money that will be paid out. You pay it up to the deductible you choose.
Your co-pay percentage. Once the deductible is satisfied, you begin sharing the cost with your insurance provider. You may split it down the middle or some other arrangement.
Your stop loss. You don’t have to share costs forever. At a certain point, your insurance company will pay 100% of the covered costs.
Your maximum coverage. It will look like a large number (e.g. $2 million) but it can be used up fairly quickly if there’s a serious health problem.
Your maximum out-of-pocket. This compiles the first three factors. Your maximum out-of-pocket equals your deductible plus your maximum co-pay amount. It only considers covered costs so just be aware that your actual out-of-pocket could be higher.
So now we want to talk about three mistakes that people often make when buying health insurance.
Pushing too much risk onto the insurance company. Being too conservative is very costly. For example, the higher your deductible, the less you’ll pay.
But George, I know when I’ve been light on money, it’s scary to think about a large hospital bill. Even a doctor’s bill of $300 – $500 can be a burden when you’re really strapped for cash.
I understand that, Mary-Lynn. But I’ll give you an example of what I’m talking about. A couple we know has over $50,000 in the bank, yet they insist on having a deductible of $500. They could save a lot of money by being a little less risk averse.
Not shopping around. As we’ve said, this is a major expense. Like most major expenses, it’s worth your time to try to save some money. So get two, or even better three, quotes.
Make sure you’re comparing apples-to-apples. The plans from two different insurance companies probably won’t be exactly alike.
Settling in. Shop carriers at least every other year. You may be surprised at how much you can save by switching plans.
This is something I learned the hard way. I liked my insurance company, but when I finally shopped coverage, I was astounded at how much I could save.
This really boils down to personal preferences. It’s nice to only pay a small amount of money when you go to the doctor. But make sure you’re weighing that convenience against the actual cost.
The key question to ask yourself is, “How much risk can I afford?
The general rule, in a financial sense, is to assume risks that are small, frequent, and inexpensive. You cover large, infrequent and expensive costs.
But also consider the emotional costs. If it’s going to keep you up at night knowing that you’re bearing a larger share of the burden, then push more risk off on the insurance company.
Think about the impact on your finances and your personal preferences to help you make this bigg decision.
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Thanks so much for reading our post today. Until next time, here’s to your bigg success!
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(Image in today's post by forwardcom)