The tradeoff between premiums and deductibles is an important consideration in choosing a health plan.
One of the most important factors we all consider when shopping for health insurance is the cost. Health insurance can get pretty expensive. It is important to ask yourself the question, “What can I afford?” When deciding which health insurance plan works best for you budget, it’s crucial to understand two important terms: premium vs. deductible.
Premium is the price you’ll pay for your health insurance plan, typically billed on a monthly basis, to maintain your healthcare coverage. The deductible is the portion of the medical cost you pay out of pocket before the insurance pays the remainder. To better understand how premiums and deductibles work together below are examples of two people and their comparing health plans.
Gina is a recent college graduate and is looking for a basic insurance coverage in case of an emergency. She doesn’t plan on using her coverage frequently so she decided to keep her monthly cost as low as possible. She put money aside to cover any cost she might deal with in case she needs to go to the doctor. Because of the infrequent use of her health insurance plan, Gina has a low premium and a high deductible.
If an emergency does happen and Gina decides to use her coverage she will have to pay more out of pocket towards her deductible before her insurance will start to pay.
Frank is married with three kids and has another baby on the way. He decided to go with a plan that will cover him and his entire family. With frequent doctor visits, Frank chose a higher monthly premium and a lower deductible. The lower deductible means Frank insurance will start paying a portion of his total bill from seeing the doctor sooner.
When thinking about a health insurance plan determine what works best for you. Is it better to pay more upfront for your premium and have the insurance company handle more of the doctor’s bill later like Frank? Or is it better to pay less premium up front and pay more when you actually need to go to the doctor like Gina?
Having an idea of the insurance you want along with knowing how much you can afford will help you when purchasing a health insurance policy. Receiving quality coverage that meets your healthcare needs is the priority.
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