Winning with Insurance

Not everything with the word “insurance” in its name is actually insurance. Sometimes, it might simply be a cost recovery plan. Here’s how you can tell the difference and why I’m opting into an insurance plan.

Insurance protects against unforeseen costs. Cost recovery reimburses planned costs. If we know that out of every 1000 workers, 5 are likely to be injured on the job, we can put in place accident insurance. It will cost 5/1000ths of a dollar for every dollar of benefit (plus admin). That is an example of insurance, and it makes economic sense. Where I worked, we had a cost recovery plan that paid for eye exams. An eye exam is something that people can get every year, not only as needed. The cost of offering the benefit (eye exams) is the cost of one exam per employee. There is no savings to individuals.

I have just begun a master degree at the University. There is a graduate student association with an insurance plan. In order to function as insurance, membership is mandatory for all full-time graduate students. It offers health and dental benefits to students and their families. Because I’m a distance student, I can choose whether or not to opt in.

The math is pretty easy. The coverage costs a little under $500 per year and it covers me, my wife and our three children. The benefit includes up to $900 of work (in one visit) each per year. For $500, I can access from $0 to $4500 of dental work. Personally, I need a crown ($1000) and my middle child needed a $350 visit. The other family members need checkups, and I don’t know how much that costs. Already, we’ll get our money’s worth, and with some luck, we’ll get reimbursed more than the cost of the coverage. That feels like a rebate on my tuition.

Do you health or dental coverage? Do you feel it’s economically worthwhile

5 thoughts on “Winning with Insurance”

  1. I am lucky. Retired military are allowed to opt into the health and dental plans that are offered to military families. A perk of getting shot at, I suppose. It is a reasonable rate, costs me about $500 per year. My wife and I don’t come close to using that up, but we will.

    My in-laws retired 17 years ago, and opted not to take the medical and dental plan offered to them, because it was more expensive than what their actual costs were. And now they are paying for that mistake. They have long ago covered what ever premiums there would have been. And the worst part, they have gone without medical and dental help because they couldn’t afford it. My wife’s father went without hearing aids for years, until he couldn’t take it anymore and paid the $3k. He also hasn’t had any teeth for about 8 years. His last set of dentures having to be fitted or replaced since then, and it was just too much for their tiny budget.

    My parents are in the same boat. All four of them, don’t have medical or dental. My mother and step father finally got some government help, as there medications were over $1k per month, and will be for the rest of their life. They have paid my lifetime of premiums so many times, I could have retired on the amount.

    Medical and dental, if you can get it at a reasonable price, keep it forever. It won’t likely pay off when your young, but it will pay you back in spades when you are older. Its good insurance! Or perhaps its a good investment. Depends on how you look at it. Either way, its a good idea. And I don’t even sell insurance….

  2. When I retire, I will continue my health converage My grandmother won’t get her teeth cleaned b/c it cost too much, now they have to be all removed. My father-in law chose to go somebody’s house and paid $10 got all teeth pulled out, my father needs $1000/mo in medication for typical old age issues, ie. cholesterol, blood thinners, preventing dementia pills, etc…. and he looks healthy like a horse! All my semi-early retired friends informed me, the insurance was well worth it b/c it’s one less thing to budget for the future.

  3. In my last 17 months of working in 2007-08, I was on COBRA (I did not work enough hours to qualify for the group health plan). This kept my medical and dental coverage intact. Anticipating an ER in late 2008, I made sure to get any costly dental work done in those months. That included a crown and two extractions (of useless wisdom teeth) which were partly or nearly fully covered by insurance.

    Now that I am without insurance but with no major problems, I figured out that the cost of my old dental premiums under COBRA, copays, and deductibles is about the same as 2 visits to my dentist per year along with one small cavity filled each visit. So being without dental coverage is not a big deal and does not bust my budget.

  4. My theory with insurance is to use it to cover possible eventualities that could wipe us out financially – e.g. house burning down, major medical/dental incidents, personal liability, etc.

    I don’t pay for insurance to cover things that we could afford to pay for ourselves – e.g. extended warranties on electrical goods (that only cost a few hundred or a thousand dollars to replace), comprehensive insurance on old cars that are only worth a couple thousand dollars anyway, pet health, etc.

    I’m happy to carry the risk myself for that second category, since the odds are good that I’ll come out ahead (otherwise the insurance companies wouldn’t be making so much profit!) and the downside of losing the gamble isn’t that bad.

    That first category, though, is important. I hate the thought that one bad incident/accident could see us lose everything, and spend the rest of our lives living in poverty.

    Also, you can usually negotiate a much lower premium by raising your excess (I think Americans call it the “deductible” – the amount you have to pay before the insurance kicks in). It’s kind of like carrying some of the risk yourself, but still limiting your worst-cast liability to something affordable.

  5. I used to add up my premiums, and consider whether I would use $ X.00 worth of dental and health benefits through my employer. Then I found out what insurance was for. My daughter was diagnosed with cancer (she’s fine now) and although her chemo drugs were supplied with the healthcare treatment, she required another drug to get her white blood cell count up. That drug cost $200 per dose (and it could only be be purchased in boxes of 10) and she needed 6 doses every other week, for 6 months.
    I was glad I had coverage.
    A person always thinks that it will happen to someone else, I am now a believer in having health care coverage.

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