Home Business Insights & Advice A comprehensive guide on gap insurance and whether you subscribe to a plan

A comprehensive guide on gap insurance and whether you subscribe to a plan

by John Saunders
4th Nov 19 12:42 pm

The cost of reliable and quality healthcare is continually rising year after year. Americans are opting for high deductible plans because the coverage against the monthly premium amount offers a more affordable and valued option for subscribers. On average, the annual deductible for an employer-sponsored healthcare plan is upwards of $1400 and higher if your coverage also extends to your family.

However, while the monthly premiums may be affordable and the coverage may be wide, the insurance plan only kicks in if one is able to pay the deductible. There are a lot of families who cannot afford a $1400 payment in an emergency and despite the insurance, there will always be additional medical costs that one will undoubtedly bear. One way to counter this is subscribing to a gap insurance plan which would help not only in paying the deductible but also cover any additional costs you might incur.

Two years ago, 60% of workers felt that supplemental health plans like gap insurance are necessary and that opinion has only gained more popularity with more than 80% of workers feeling the need to opt for a gap insurance plan. Subscription to gap plans grew after the establishment of the federal healthcare marketplace where more and more people started opting for high deductible insurance plans. In 2016, 90% of people subscribing to insurance using an insurance exchange opted for a plan that had a $3000 deductible. With the growing trend in subscription to high deductible insurance plans, it’s only natural that people would also subscribe to gap insurance as it is a way to help manage high deductible insurance plans.

This article will examine what gap insurance is and if one should consider subscribing to a plan if they already subscribe to a high deductible insurance plan. Hopefully, we’ll be able to help you make a decision if you’re considering subscribing to a gap insurance plan yourself and address any concerns you may have.

Gap insurance explained

Gap insurance is where you pay a monthly premium in exchange for a payment of a sum which will help you pay your yearly deductible and cover any medical bills that are not covered by your existing medical insurance. It not only helps individuals but also helps companies if they are providing healthcare coverage to their employees.

However, gap insurance is not to be confused as a form of medical insurance or a standalone insurance policy. In fact, as per the conditions and requirements that are given under the Affordable Care Act, gap insurance does not qualify as health insurance and opting for a gap insurance plan as a standalone policy could result in tax penalties.

Also, it should be made clear that gap insurance policies will not cover the entire cost of treatment of certain conditions or any medical bills. Gap insurance policies pay a pre-determined amount of money regardless of whether you’re suffering from a certain illness or need emergency surgery. With limited benefits, the main goal of gap insurance is to help you with paying deductibles and any additional medical bills one may incur.

Subscription cost

As is with other policies, gap insurance providers have their own individual formula for calculating monthly premiums and payout amounts. The usual factors are taken into consideration including age, gender, employment status, family, etc. There are also the formalities that you need to go through although some insurance plans, like NGL gap insurance, are pretty straightforward. However, a safe assumption for a range that one would expect to pay in monthly premiums is $30 to $40 per month.

Some other factors that would have bearing on your monthly premium are the policy that you subscribe to and the level of coverage you require. Also, coming back to the Affordable Care Act, since gap insurance plans are not regulated under any healthcare law, there is no restriction on insurance providers and they can deny coverage on the basis of pre-existing conditions.

Is gap insurance a good option for me?

A conclusive and universal opinion on gap insurance is not possible as it depends on numerous individual factors and circumstances. One needs to consider the risk of medical emergency they perceive when it comes to their wellbeing or their family’s wellbeing. First, check your existing insurance policy and check whether the coverage it provides is really adequate and whether subscribing to another insurance policy is really necessary. You also need to consider the numbers and use a simple equation to assess whether subscribing to a gap insurance plan makes fiscal sense. Add up how much you would paying in monthly premiums over the year and compare it against the total annual deductible of your existing insurance policy. If the premiums under the gap insurance policy cost significantly less than the annual deductible, then the gap insurance plan will offer immense value and should be opted.

There are also some specific situations where opting for gap insurance is just financially smart. For example, if you’re expecting a baby, then you could subscribe to a gap insurance plan for the year to help pay your deductible which you will inevitably need to pay if you want the insurance to cover the medical bills for the birth of the baby. You could also use the money to cover any additional medical bills that your insurance policy doesn’t cover.

Conclusion

Gap insurance plans truly are a great way to cover deductible payments, especially if you’ve opted for a high deductible plan, and any additional medical bills you might unexpectedly incur. However, this does not mean that everyone should subscribe to such a plan. One should assess their individual needs, do the math, and properly assess whether the gap insurance plan offers any additional and necessary coverage and is providing value for money.

If you’re looking for further answers, it might help to talk to a consultant or insurance provider to properly assess all your options. If you’re looking for some great gap insurance plans, check out NGLIC insurance options.

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