Comparing Costs of Short and Long Term Health Insurance

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The most significant difference between long- and short-term health insurance is the flexibility in policies. Short-term insurance policies provide greater flexibility, which allows you to control better the costs associated with your plan.

There are more options with short term health insurance because companies understand there is a specific reason you are getting the insurance. You will not be an ongoing customer, so the likelihood of them having to pay out a lot of money is minimal.

Most people choose short-term insurance to fill a gap in health coverage. For example, if they are between jobs, they may need insurance for a few months until they are comfortable in their new position. It is also common for young adults who age off of their parent’s health insurance but do not yet have a job that provides health insurance. Another situation when someone may choose short-term health insurance is if they are planning to go on an extended trip and want to ensure they are covered should something happen. 

Short-term insurance can be as short as a couple of weeks or as long as three years. If you need the insurance for more than three years, the insurance companies will want you to choose long-term insurance. If you are unsure of how long you will need it, you can start with a six-month plan and renew it as required. Vary terms will give you some extra flexibility, so you are not stuck with insurance you do not need.

The factors that you have more flexibility with include the amount of coverage you have and the amount of your deductible. You could choose minimal health coverage that would primarily only cover you if you were to be in an accident or get a sudden and severe illness. You can also select the amount of your deductible; the higher the deductible, the lower your premiums.

The deductible is the amount of money you have to pay before the insurance kicks in. For example, you can have a $4000 deductible, which means you are responsible for all medical costs up to $4000. Beyond that initial deductible, your health care costs will be split between you and the insurance company. An 80/20 split is typical with high-deductible insurance. That split means after you paid your deductible, the insurance company will cover 80% of your healthcare costs while you are responsible for the remaining 20% of all healthcare costs.

While high-deductible insurance may not sound like a great idea, it allows you to have lower monthly premiums because the company knows the likelihood of them having to pay out a lot in health coverage is minimal. The downside to high-deductible insurance is that you need to make sure you keep enough money in the bank to cover the deductible should you need healthcare.

Long-term insurance offers less flexibility because the insurance company is going into the agreement understanding you will likely utilize the insurance frequently. It is in their best interests to ensure they are not paying out far more than you are paying in.

Insurance companies have contracts with healthcare providers ensuring they are getting a better rate on services than people would on their own. Controlling costs is one-way insurance companies control how much they spend. In some cases, this has limited health resources for people because doctors are unable to perform the tests or procedures for the amount the insurance company is willing to pay them.

While the option of lower premiums with short-term insurance may be attractive, it is only beneficial if you can pay your portion of the bill, so it is something to consider carefully before choosing an insurance plan. 

Short term health insurance plans are also an option for older citizens, who may need something to supplement their existing insurance due to their health condition. Assisted living and nursing home facilities are very costly. Additionally, regardless of their physical condition, many people want to stay in their homes. Options like ramps going into the house, wider doors, and a handicap bathroom remodel can make it significantly easier for people with physical ailments to stay in their home, but they will need the extra insurance to reduce their expenses. 

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