The Insurance Trap

Several years back I worked to meet with and supply individuals insurance coverage based on their needs and wants for the life stage they were in.  I was astounded at the majority of people who would come meet with me and have no idea of the insurance that they currently held, or the holes that were not yet being met.  I, myself, have even found myself in that trap at times where we were looped into an insurance policy, or encouraged to enroll in something that we really didn’t understand the needs for in the first place.

Case and point.  I spoke with someone on the phone just this morning who told me that he had been paying HUNDREDS of dollars into a “maternity rider” that they understood would help them significantly once they became pregnant.  Well, there’s now a baby, with a due-date, and now that they’re looking more carefully into the maternity benefits they had been investing hundreds toward, they’re discovering the benefit really isn’t very good at all.  In fact, they probably would have saved money in the long run if they would have just saved and invested the premium they were paying and paid the costs of delivery out of pocket, rather than depending on a worthless policy.

This is such an easy trap to fall into, and unless you’re willing to spend some time on the front-end, closely looking into the policy you select, you too could find yourself in this same boat.  Here are a few things to look for, when analyzing whether or not you need that insurance plan:

1.     Premium Paid vs. Benefit Paid:  As obvious as it sounds, you should not pay more for your insurance premium, than you may receive from the insurance policy benefits.  (Keep in mind that many times the doctor’s see the benefit money, and you don’t.)  IN other words, the next time you’re encouraged to consider that dental plan, go ahead and calculate out the benefits you’ll receive from the upcoming/ or a normal dental year.  (A filling, a few exams/cleanings, some x-rays, etc.)  If the benefit you’ll be receiving is less than a years worth of premium, you may want to look carefully at why you want to enroll in the policy.

2.     Consider the need:  Ask yourself, “Do I really need this?”  A trap that I found many people fall into was the concern that they may need something in the future, but knew it would not be a need for today.  In some cases, this is true.  You may be diagnosed with some type of horrific disease in the future, but if you are surrounding yourself and covering yourself with policies to help the “maybe’s” you may find yourself shelling out hundreds a month toward a policy you may never use.  Please know I am not telling you to never get those policies – I actually do think it’s important to look critically and plan for the future.  However, if you are paying for insurance policies covering every possible scenario, you may be overpaying.

3.     Plan Ahead:  There are several insurance policies that are incredibly helpful, but they do take some pre-planning.  For example, Aflac offers an incredible policy for maternity coverage that will pay you hundreds cash once your baby is born, and you’ll only invest about $30 a month toward it.  It’s a great benefit, but the catch is that you cannot be pregnant when you enroll in the policy, meaning you have to plan ahead.  Short-term disability works the same way – pre-planning brings assistance when you need it. 

Looking to save some cash?  Try taking a closer look at your insurance plan this month and making adjustments as needed.   I’ll bet you’ll be surprised at what you find!