Understanding Supplemental Insurance
Insurance is intended to help people survive catastrophic financial misfortune. Health insurance, for example, can turn a $50,000 medical bill into an affordable co-payment or deductible. Unfortunately, for many Americans the deductible or co-payment can itself cause serious hardship. Enter supplemental insurance, insurance designed to help cover the cost of co-payments and other things not covered by major policies.
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The Insurance Gap
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Most health insurance policies carry a deductible or co-payment. Deductibles are an amount of expense the insured must pay before the insurance kicks in. A co-payment is a flat rate or percentage rate that the insured must pay along with what the insurance pays for. Though these are designed to be fair, a 10 percent co-payment on a $20,000 medical bill can hurt. Even taking into account co-payment and deductible limits, many families can't afford these payments on their own.
The Income Problem
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When somebody uses medical insurance, this mean they have gotten sick or injured. In most cases, this will mean missing work. Sick leave doesn't last forever. Though many people carry long- and short-term disability insurance, most disability insurance programs cover only a percentage of the insured's monthly income. Many supplementary insurance programs are designed to provide extra income as well as cover basic medical expenses.
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Types of Supplemental Insurance
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Supplemental insurance programs are either flat rate or scheduled payment programs. A flat rate program pays a certain amount of money per incidence or per day when somebody is injured or ill. For example, a policy might pay off $100 for each hospital visit or $200 per day of a stay in the hospital. A scheduled payment program has a list of illnesses and injuries with corresponding dollar amounts. It might pay $100 for stitches and $2,000 for an appendectomy. Supplemental insurance programs are also divided according to what they will cover: some cover only accidents, other only illness, others cover both.
Who Needs Supplemental Insurance
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Supplemental insurance is relatively inexpensive, with policies in 2010 running at less than $25 per month. This makes it a good program for people who would not be able to afford the stated deductible or copay for their health insurance program. According to Dave Ramsey in "Total Money Makeover," if you have accessible savings equal to our greater than your maximum yearly out of pocket expenses as stated in your policy, you have no need for supplemental insurance.
Warning
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Since 2000, some supplemental insurance companies have engaged in advertising that make them seem like full health coverage. They charge the typical rate for supplemental insurance, billing themselves as "affordable health insurance." People have purchased these policies to late discover that the low supplemental payment doesn't begin to cover the cost of their medical expenses. When buying health insurance, confirm that you are buying the right kind of insurance for your needs.
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