Medical Insurance Deductible - How High Or Low Should You Set It?

When you sign up for health insurance, one of the first choices you are expected to make is how high you want your medical insurance deductible to be. What they are really asking is how much money do you want to pay directly to your health care providers before your health insurance kicks in and takes care of the rest.

You may be thinking to yourself, "Why would I want to pay anything to my doctor? Isn't that the job of the health insurance company? What am I paying health insurance for then?"

Well, the simple answer is that there is a tradeoff between your annual medical insurance deductible and your monthly medical insurance premium. The higher your deductible, the lower your monthly premiums will be. The lower your annual deductible, the higher your monthly premiums will be.

Now, if you are generally a healthy person who rarely ever gets sick, rarely ever goes to the doctor, doesn't take any prescription medications, and you don't need maternity coverage, then the equation is very simple: You could go with the lower monthly premium option. You would only pay toward your annual deductible on an as-needed basis, for those rare occasions when you might actually need to see a doctor.

On the other hand, if you or someone in your family visits the doctor frequently, needs to take prescription drugs, or if you are planning for a baby and need maternity coverage, then your medical expenses will no doubt be greater.

In this case, the choice between higher deductible with lower premiums and lower deductible with higher premiums really depends on how you want to budget your medical expenses. Medical insurance deductibles are a variable cost. You pay them directly to the doctor on an as-needed basis. So it is your responsibility to budget for your deductible expenses.

So if you have a lower monthly premium and a higher deductible, then you need to be ready to shell out the cash to pay your doctors.

Conversely, if you have a higher monthly premium and a lower deductible, then your medical expenses will be much easier to budget for because they will be more fixed: You pay a higher premium, but it is a fixed monthly cost. And your deductible is much lower, so your variable expenses will be a lot cheaper and thus easier to budget for.