One way to avoid becoming “insurance poor” is to take out health insurance with a high deductible. My advice is that we ask ourselves a question: “If I had a major medical catastrophe, how much money could I find to pay for it?”
If you have no problem finding $5,000 to pay the deductible in the case of a major catastrophe, then a $5,000 deductible is a good option. If you think you could only find $1,000 in a crisis, then $1,000 would be a reasonable deductible. People generally choose a deductible based on their ability to meet that deductible.
Here is the variation in annual insurance premiums for a couple between the ages of 30-34 with two children under nine years (no maternity coverage) for various deductibles:
$250 deductible - $1976
$500 deductible - $1793
$1,000 deductible - $1389
$2,500 deductible - $1214
$5,000 deductible - $ 965
$10,000 deductible - $ 834
You will note that the savings between the $5,000 deductible and the $10,000 deductible are minimal. You only save $65 with the higher deductible but add $5,000 to the deductible, so it would be best not to go higher than the $5,000 deductible. The $5,000 deductible plan works out to $80 a month. The difference in premium between the $250 deductible and the $5,000 deductible is $1,000. If you have no major medical problems in five years, you will have saved $5,000, which you would need to meet the deductible. And this is a very good plan.
Many folks think that going with a high deductible saves a lot of money. You do save, but sometimes not so much. Note the changes in annual premium for a 30-34 year old male based on various deductibles:
$250 deductible = $1,275
$500 deductible = $1,120
$1,000 deductible = $871
$2,500 deductible = $772
$5,000 deductible = $632
$10,000 deductible = $498
The largest saving of $249 comes between the $500 and $1,000 deductible. Going from $1,000 to $2,500 saves only $99, and from $2,500 to $5,000 only saves $140. In fact, going from $1,000 to $5,000 saves only $239 per year even though you have added $4,000 to the deductible. So increasing the deductible does not produce great savings. Up to the present time, with all companies, the $1,000 deductible seems to be the most cost-efficient.
Jeff Gulleson is the President of Good Neighbor Insurance. Good Neighbor Insurance represents 10 international health insurance companies and provides international health and travel insurance for every country in the world. Other products include international medical-evacuation-insurance, international term life insurance, international disability insurance and international group health insurance. Also insurance is provided for short-term mission workers and missionary teams. Good Neighbor Insurance can also provide health insurance options for individuals returning to and/or residing in the USA. To get a good overview and/or apply for insurance plans offered by Good Neighbor Insurance please go to http://www.gninsurance.com
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