In Certain Scenarios, Complementary Health Insurance Becomes Valuable (Beyond Retirement Age)
There's hardly a topic less enticing or more irritating than health insurance. The entire process is annoying for most people: Understanding plans is complex, costs appear astronomical, and when you submit claims, you frequently receive blank denials that provide no clarity and have few options for appeal or additional information. Despite this, most people believe that once they select a plan through their employer, they're at least safeguarded from significant troubles for the foreseeable future.
However, this might not be the truth. When we discuss supplemental insurance, it's typically in relation to Medicare due to the well-known shortcomings in that coverage. But even if you have excellent insurance through an employer or organization, you might require supplemental insurance to ensure you're fully protected. The issue? Determining whether you actually need it.
What is supplemental insurance?
Supplemental insurance is a type of coverage you purchase in addition to your primary cover, designed to cover things your overall policy may overlook. It's not meant to serve as primary coverage. There are numerous types of supplemental insurance. For example, if you traveled to a foreign country and bought travel health insurance, that's a form of supplemental insurance. You can also buy specific supplemental plans that cover you for accidents, critical illness (including policies for cancer diagnoses), hospital costs, vision and dental, and disability.
You pay a premium for your supplemental insurance and have a predetermined set of benefits, like your other insurance. However, supplemental plans typically pay either a flat amount or a percentage of your costs directly to you. For instance, if you have a hospital indemnity plan and you receive a massive bill after a week in the hospital that your main insurance only partially covers, supplemental insurance would step in and send you a lump sum check to help cover those costs.
Supplemental health insurance is an additional expense, of course, so the main question you need to answer is whether you actually need it. Paying twice for the same coverage doesn't make sense, and neither does paying for coverage you'll never use. But there are four scenarios when it's quite clear you need supplemental insurance.
If you have a high deductible
The average deductible with an employer health insurance plan keeps increasing toward $2,000, and the out-of-pocketmaximum (the most you’ll pay, including deductibles and co-pays, during the term of your policy, in addition to your premium) is capped by law at $9,450 for individuals and $18,900 for families—though the average out-of-pocket in 2023 was $4,346. Compare these figures to your savings account. If there's a substantial difference, it means you wouldn't be able to afford a significant medical expense without resorting to loans, home equity, or credit cards.
If that describes your situation, supplemental health insurance might be a smart move, as it can cover a part of those expenses and minimize your exposure. If nothing else, it can provide you with more breathing room if you end up paying for an expensive surgery or hospital stay.
If you're at high risk for health problems or injury
Another reason you might want to consider paying for supplemental insurance is if you have a higher risk than most people for incurring large healthcare expenses:
- *Family history*. If you have a high incidence of serious illnesses like cancer, or you've undergone genetic testing and have a high risk for developing some form of cancer, paying for supplemental insurance might make sense, since there's a good chance you'll need to pay for expensive treatments at some point.
- Dangerous job. If you work in an industry that has a very high rate of serious injury, like construction or logging, you might need more coverage to protect you against frequent medical bills.
If you use a lot of healthcare
If you frequently use healthcare resources, due to health conditions or family situations, and you don't anticipate that changing anytime soon, supplemental insurance can make sense. While you might hit your deductibles and out-of-pocket maximums fairly quickly, your policy might not offer enough coverage for your needs.
This is especially true if there's a risk that you might become unable to work. Your main insurance might cover most or even all of your expenses, but could you handle losing your income for a period of time? If you're unable to work, you might also need to pay for additional expenses, like childcare, help around the house, or in-home care, and supplemental insurance might be the difference between financial survival and ruin.
If your coverage has gaps
Finally, supplemental insurance might fill the gaps in traditional insurance coverage—like dental and vision insurance, which are (weirdly) treated as separate from health insurance, and are often frustratingly bare-bones in terms of what they cover. Who hasn't gone to the eye doctor only to discover that their basic vision insurance barely covers the examination and offers nothing at all for those expensive glasses and contact lenses? Or discovered that their dental insurance has such a high deductible it never actually pays for anything aside from bi-annual cleanings?
If your vision and dental insurance aren't helping much, a supplemental plan can be beneficial, especially if you anticipate a lot of use in the coming year (e.g., if you’ve been putting off dental work because your insurance is crap and won't cover anything).
Supplemental health insurance isn’t always necessary, but it’s worth crunching the numbers to see if it might benefit you—especially if you fall into one of these four categories.
Although most people believe they are adequately covered by their employer's health insurance, they might need supplemental insurance to fully protect themselves, especially if they have a high deductible or a family history of serious illnesses. Purchasing supplemental health insurance would mean paying an additional premium, but it could provide financial relief during medical emergencies or cover gaps in basic insurance plans, such as dental and vision care. Money is a significant consideration when evaluating the need for supplemental insurance, as paying twice for the same coverage or for coverage one never uses is not an optimal choice.
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