Consumer’s Health Insurance Blog

I met a fellow recently at a local chamber of commerce event who was very interested in my book. He was kind enough to buy a copy and has since been in contact with me, and I have learned that Howard has been a life (mostly) and health (recently) agent for a long time from his record at the North Carolina State Department of Insurance.

Howard has been very complimentary about the book, helping to spread the word, and praising my efforts. However, he said to me that I missed an important topic in the book: Supplementary Policies. While they are mentioned *briefly* in the book, there is an analogy that come to my mind that may help to understand the role of these lesser-known products. The analogy is to the mortgage business. It goes like this:

If your major medical insurance is like your first mortgage, say an 80% financing, then the supplementary policy could be like a second mortgage, for 5%, 10%, or even 20% in the case of a real estate purchase with no money down. And like the mortgage business, there are many flavors of these supplementary policies to choose from, and they are not the right choice for everybody, but they do have a place.

Here are a few uses for these supplementary policies (and remember, these are best if you want to mitigate your financial risk when you already *have* major medical insurance):

• An accident supplement could be used to offset a deductible amount when you don’t have enough savings to cover a high deductible major medical plan
• A hospitalization supplement could be used in a similar manner for causes other than an accident
• A named peril supplement could be used for expenses if you get a specific disease
• A terminal illness supplement could be used for expenses at the end of someone’s life
• Any of these supplements might be useful if a person cannot get other insurance and fully understands what coverage they’re getting

Are any of these supplements part of a good deal strategy? They might be if you’re looking at a high deductible major medical plan for the long term, but don’t yet have the savings to cover the deductible. But you should compare the premium of different deductibles in your major medical to see if the supplement is a better deal, and consider how long you might need to keep the supplemental plan. In some cases the insurer will allow you to move from a lower deductible plan to a higher deductible plan without any underwriting, allowing you to reduce your premium as your savings increase.

In summary, these products are not for the majority of people. They are most useful for some special situations that I’ve highlighted above. They are probably more loosely regulated by the states and harder to know that you’re getting a good deal, and should never be a substitute for a comprehensive health insurance policy. Join me in a discussion through comments or your own blog.

Jonathan Pletzke is a consumer expert on health insurance and author of the health insurance book Get a Good Deal on Your Health Insurance Without Getting Ripped-Off, available online and at bookstores nationally. Additional details can be found at the consumers health insurance book and resources website www.BestHealthInsuranceBook.com. Copyright 2007-2008 Aji Publishing.

Tags:   Accident Health Insurance · Health Insurance · Hospitalization Insurance · Named Peril Health Insurance · Supplementary Health Insurance · Terminal Illness InsuranceNo Comments