Health insurance

Everyone needs some kind of health insurance, even if it's a very basic policy. Since health care if getting more and more expensive, exposure to major medical costs without coverage exposes you to tremendous expenses and can ruin any financial plan.

The four key aspects of health insurance are the annual out-of pocket maximum, the annual deductible, covered expenses and the lifetime maximum. If you are comparing policies, compare these four elements first.

Health insurance can be very expensive. Depending on your financial situation, it may save you money to pay more for your medical expenses and less for premium. It pays to analyze your expenses for the last year by adding up your premium and out-of-pocket costs. Would you have saved money either by getting a richer or leaner policy? Generally, the more you pay in premium, the more services are covered. If you are healthy, you may be far better off getting a high-deductible policy with a reasonable out-of-pocket maximum and a lower premium. If you know you will use the insurance often, you may come out ahead by getting a richer policy.

Now, more and more policies are offering restricted coverage for items they used to cover in full. Some offer no prescriptions, generic only, or very high additional deductibles for brand name drugs. Some offer an annual cap on the amount they will reimburse for prescription drugs. Even if you don't take prescriptions now, be aware that if you need to take prescriptions they can be a very expensive out-of-pocket expense. Also, some plans do not offer maternity coverage. Match up the plan with your needs.

By reviewing your premium plus out of pocket costs for an average year, you can analyze your options. Choose the best policy for the most reasonable expense.

Always get a policy with a substantial lifetime maximum. Good policies offer a $5,000,000 lifetime maximum or more.

Barbara Bachelder, CFP® for Wealth by Design, LLC