Sunday, January 27, 2013

Health Insurance - High Deductible Vs High Monthly Premium

What is the one decision that influences most peoples' choices when enrolling in a plan for health insurance:

High deductible versus high monthly premium.

Annual out-of-pocket deductible expense limits typically vary with inverse proportion to your monthly premium payments. So the higher your deductible limit, the lower your monthly premiums will be. The lower your deductible limit is, the higher your monthly premiums will be.

So when does it make sense for you to have, under an insurance plan, high deductible limits?

Typically, if you and / or your dependents are generally healthy and rarely ever need to go to the doctor, it would be more cost-effective in the long-run to opt for the plan that has the higher deductible. Your monthly premiums will be much lower. And whenever, if ever you do need to go to the doctor, you will have to pay for your doctor visits and your prescriptions out of your own pocket (unless you have a set copay amount.)

On the other hand, if you and / or your dependents have a frequent need to visit the doctor, are on chronic medication, or if you have a need for maternity coverage, then it might make more sense to opt for plans with a higher premium and lower deductible.

Yes, you will be paying a higher health insurance bill every month. But you will have to pay less money in out-of-pocket costs. In other words, your medical expenses will be more fixed every month. This makes budgeting your medical expenses much easier. If you have less of a need for health insurance, high deductible plans make more sense, since your medical expenses would be variable and less frequent.

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