With lovable mascots and catchy slogans, companies that sell supplemental insurance say they are helping you pay for the things your health insurance doesn’t pay for.
According to Aflac, one of the largest supplementary insurers in the country,
Health insurance pays around 60% of the medical costs; you have to pay the remaining 40%.
How do you fill in these gaps? For some people, buying additional insurance might be an answer. It makes less sense to others.
What is additional insurance?
Supplementary insurance, sometimes referred to as secondary or special insurance, helps pay for expenses that your health insurance does not cover. You can take out supplementary insurance or several small plans to supplement your primary health insurance and pay for different things in different circumstances.
Note: There is a difference between supplemental health insurance for people under 65 with health insurance and Medicare supplemental plans for people 65 and over. This article does not deal with Medicare or Medigap supplements.
“While supplemental insurance products do not replace a person’s great health coverage, they do provide additional financial protection that can help people focus on their recovery and not pay their bills,” said Wendy Herndon, second vice president of product launch and adoption at Aflac.
As the policyholder, you pay most supplementary insurance policies directly instead of paying a provider as you would with regular health insurance. Payments are made either periodically or as a lump sum up to a plan maximum.
Supplementary insurance can help pay medical expenses such as co-payments, co-insurance, deductibles and much more that have nothing to do with medication.
“A policyholder can choose to use the money however they want, including covering their daily living expenses or groceries, or paying their utilities, rent or mortgage. This really helps him get that extra financial coverage, ”explains Herdon.
Many companies sell supplemental insurance so you don’t have to get plans with the same insurer as your health insurance.
Different types of supplementary insurance
Supplementary insurance plans are often specific, so you may need more than one plan to cover anything that could happen to you or your family.
“As a rule, these are somewhat specialized and targeted covers,” says Steven Weisbart, Senior Vice President and Chief Economist of Insurance information institute. “[They are] often narrowly defined conditions for what the insurance offers, which has the advantage of keeping the premium low. “
Some typical types of guidelines include:
- Accident: If you are injured in an accident, the policy will cover the costs you incur as a result of the accident. There is a list of benefits and what the policy pays and when, often including copays for testing, physical therapy, and more.
- Cancer, anxiety disorder, or a specific health event: Some companies sell a policy that covers cancer, anxiety disorders, or events such as heart attack or stroke. Some companies separate them so you might need different guidelines if, for example, you want to cover both cancer and heart attack. These guidelines usually pay a flat rate at diagnosis and then have a benefit plan for different items. There is usually a list of diseases and conditions covered. Anything not on the list will not be covered.
- Hospital: If you end up in the hospital, most major medical guidelines won’t pay 100% of the cost. This type of policy could make up the difference.
Just as there are different types of policies, there are different levels of coverage within each category.
“There is a low, a medium, and a high value, and all the benefits are the same. The only difference is the size of the payout,” says Herndon.
The cost of the different plans vary by company. Aflac plans start at around $ 13 per month for accident insurance, $ 17 for cancer protection, $ 10 for other set health events, and $ 17 for hospital plans. The premiums increase if more than one person is insured and for plans at a higher level. The premiums and the availability of policies vary depending on the federal state due to different regulations.
Many employers offer supplementary insurance as part of their voluntary benefit packages with premiums paid through wage deduction, sometimes with pre-tax monies. You can also purchase plans directly from insurers or through insurance brokers.
Typically, you don’t have to wait for an open registration period or life changing event to add additional policies.
Who needs additional insurance?
The fear of financial ruin is often a driving force when purchasing additional health insurance.
After the 2019-20 Aflac WorkForces report52% of American workers said that if they had medical expenses greater than $ 1,000 they couldn’t afford it.
To find out if you want to take out additional insurance, Weisbart suggests checking that the cost of the premiums is worth the benefits. If you can cover expenses like copays and co-insurance, you may not need supplemental insurance. Also, think about how often you see a doctor and your family’s medical history.
Payouts for Aflac plans vary. The benefits for initial diagnosis of cancer range from $ 1,000 to $ 6,000. A heart attack policy would pay $ 7,500. Accident insurance payment is based on what happened and treatment required and ranges from $ 20 to $ 13,000.
Guidelines are also stackable. So if you have both accident and hospital insurance, you can receive payouts from both policies if you are hospitalized as a result of an accident.
In many cases, Weisbart says, it might be better, in the long run, to invest the money you would pay for additional insurance premiums into savings.
“If a problem never develops, you have the savings for other uses,” he says, adding that many people who have specialist insurance never get money because they pay the premiums for years without ever making a claim .
“I think a lot of people are overinsured,” says Mary Bell Carlson, certified financial planner and accredited financial advisor Chief Financial Mom. “There is insurance for almost everything. The fact is, you need insurance to cover your high expenses and then you can actually save to pay the copays and deductibles.
“There are other options than taking out insurance.”
Carlson suggests a long-term disability plan in case you are unable to work due to illness or injury.
It offers two ways to save to pay for additional health care expenses:
“Most companies have flexible spending accounts (FSAs) that you put dollars in before tax and that you never pay tax on because they’re only for medical care,” says Carlson. You decide how much, up to an annual maximum, you want to contribute to an FSA and you either use it or lose it.
A health insurance account (HSA) is similar, but only applies to people with high deductible health insurance plans. “It’s still going in dollars before taxes, but it’s not used or lost. It becomes like a health care retirement account,” she says.
Regardless of this, it is important to inform the relatives of the type of reporting.
“It’s easy to imagine that you’re going to get sick, go to the hospital and be in pretty bad shape. Someone might claim this policy on your behalf, but nobody knows,” says Weisbart. “All of the money that you have invested in the payment of the premium does not result in a claim payment, since the policy is practically invisible. “
Tiffani Sherman is a Florida-based freelance reporter with over 25 years of experience writing on finance, health, travel, and other topics.
This article originally appeared on www.thepennyhoarder.com