Cut Through the Confusion by Learning the Basics of a Supplemental Insurance Plan

Cut Through the Confusion by Learning the Basics of a Supplemental Insurance Plan

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Whether you’re between jobs or just want some backup to fill the gaps in your regular insurance policy, a supplemental insurance plan can help you save money and get better coverage — but where do you even start to find the one that’s right for you?

The truth is, it can be a little confusing to shop for the perfect plan if you don’t know what to expect going in. So let’s break it down, bit by bit, to learn the essentials of what every smart supplemental shopper should know.

Lesson 1: Learn the Types of Supplemental Policies

Once you start your search for a supplemental insurance plan, you might be overwhelmed by how many options there are. Each plan has its own nuances to consider, from what it covers to how much it covers and under what terms. Always read the fine print of each policy and ask your broker for help learning what you’re getting. But in general, you’ll come across a few common types of plans as you shop around:

  • Hospital indemnity plans, or fixed indemnity plans, pay out a fixed amount of money if you’re hospitalized. This money can go toward your standard plan’s deductible or other expenses you might have trouble covering while you’re stuck in the hospital.
  • Accident plans come into play if you get injured or sustain an accident, like a car crash. They help you cover the cost of unexpected medical expenses, such as ambulance rides, procedures and treatments by sending cash payments right to you. Accident plans can share similarities with hospital indemnity plans — their limitations and stipulations may be different, though, so always read the fine print closely.
  • Critical illness plans offer cash if you’re diagnosed with one of several specified illnesses set out by the plan’s terms. Often, this kind of plan includes chronic conditions like heart conditions and cancer.
  • Short-term plans allow you to access health care coverage for a limited period of time. These plans tend have very low premiums, and while they don’t cover everything a regular plan would, they’re great for ensuring you have basic coverage.

Lesson 2: Get the Hang of Deductibles, Premiums, Payouts and More

Some supplemental insurance plans don’t make you meet a deductible, unlike standard insurance policies, while others, including short-term plans, usually do. And though short-term plans have coinsurance, copays and network limitations, hospital indemnity, accident and critical illness plans genally don’t, which means you can use any doctor, hospital or lab you want. Instead, these plans operate from a premium and payout model, which provides fixed cash amounts for designated accidents or illnesses, regardless of how much those providers charge — all for one monthly premium that often comes below a regular plan’s cost.

For example, in some areas of the country, a fixed indemnity plan might pay a lump sum of $100 if you need an ambulance ride, with no deductible required. Of course, if the ambulance ride ends up costing more than that, you’ll still be responsible for whatever bill is left — but at least you’ll save a Benjamin along the way. And on the flip side, if it costs less, the extra cash is yours to keep. Your premiums will vary depending on the level of benefits you select.

Lesson 3: Figure Out Lump Sum Benefits

If you’re enrolled in a supplementary plan that pays out benefits for specific illnesses or accidents, your policy will specify how much those lump sum benefits are. For example, a critical illness plan might pay out a lump sum of $7,500 for designated illnesses — such as cancer, organ transplants or comas — but you’ll need to check specific plans for their coverage allowances before you buy.

Lesson 4: Investigate Covered Dependents

Most supplemental insurance plans allow for spouse and dependent child coverage, but you’ll need to ask how those additions impact the premium and payout amounts. For example, a plan that offers $7,500 in lump sum payouts for an adult policyholder may only pay out $2,500 for a child in the same situation, so check the limits first.

Lesson 5: Brush Up on Enrollment and Coverage Eligibility

Luckily, there are no enrollment periods for supplemental plans: You can buy for yourself or for dependents at any time. That said, some supplemental plans require a 30-day or more waiting period before benefits kick in, as well as a 12-month pre-existing condition limitation. While in some states short-term plans can last up to 364 days (and be renewed twice, at the insurer’s discretion), in others they’re more limited or not available at all. And remember that supplemental plans don’t comply with the Affordable Care Act, which means they’re not required to cover pre-existing conditions the way standard insurance plans are.

Before you rush in and buy a plan without doing your research, comb through these five lessons so you go into supplemental insurance plan shopping knowing exactly what you’re looking for. A few minutes of preparation now can save you from some serious financial headaches down the road, so it pays to be a savvy shopper.

Bana Jobe

Bana Jobe is an award-winning medical writer with over 10 years of experience

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