Is Dental Insurance Worth The Cost?

September 29th, 2011 | Author: scadmin

Dental Insurance has Very Expensive Premiums

What do you get for investing in dental insurance?

Unlike prescription drug coverage or extended medical insurance, dental insurance is one of the most costly forms of health insurance coverage you can pay for. Insurance companies know that you will use your dental insurance coverage frequently if you have it. Your local dentists wants you to come back for regular checkups, do lots of preventative treatments, and from time to time a major bit of work to keep your teeth and gums healthy.

In no way is this article suggesting you don’t need to get dental work done to fix up your teeth and keep up with oral health. I encourage everyone to follow the advice of their dentist and do the work that needs to be done. What we are talking about is whether or not you should pay for a dental insurance policy to cover the costs of ongoing dental exams and treatments over your lifetime.

Pros for having dental insurance

Protects your monthly budget from dental cost shocks

If you have a large family, there are many times with parents and children that they need dental work done immediately. Dental emergencies will come throughout your life, and they are not cheap. An unexpected dental treatment for a cavity, broken tooth or root canal could cost you thousands of dollars. If this would seriously affect your budget and make it hard to pay for things like your mortgage or groceries, you might want to have a dental insurance plan. It could save you from short term financial hardship.

Peace of mind you have coverage

Many people just like to have the peace of mind that they have insurance for all health and dental expenses. You might be accustomed to having coverage from being a member of a group benefits plan at work, where a large percentage of your dental expenses were covered. Even when people leave their employment and lose group insurance benefits they want to continue the coverage and have the same peace of mind. Sometimes the cost of dental insurance is less of a burden than worrying that your family is without coverage.

Your employer pays for it through a group benefits plan

If you are lucky enough to have a group benefits plan that your employer pays for, then take full advantage of the dental insurance. The high cost of the premiums are still being paid, but not by you. The cost is put onto the employers financial books, and becomes a tax deductible expense to the business. The benefits you enjoy are a non-taxable benefit to the you (the employee), so use the coverage and enjoy the security it provides. Be aware though that increased usage by all employees in the group will push up premiums for the employer. If costs go up too high the employer might reduce benefits for dental insurance or cancel the plan altogether. It is not a guaranteed policy that you own – it belongs to your company.

Premiums might be tax deductible

If you are paying for your own dental insurance plan you might be able to tax deduct the premiums. If you are self employed with a corporation, you can set up a Private Health Services Plan (PHSP) that can tax deduct the premiums for your personal dental insurance policy from your company’s gross income. All the benefits you would enjoy from the dental insurance plan would be tax free to you if set up properly as a PHSP. Even if you are not incorporated, the costs for eligible dental care will still create tax credits for you and your family.

Cons for paying for dental insurance coverage

Insurance companies make at least 30% profit over time

Insurance companies are not in the business of losing money on any of their insurance products. If you own a dental insurance plan that is costing your family $250 per month in premiums (family of 4), that adds up to $3,000 per year. In some years you might have a lot of dental expenses for each member of the family, adding up to a cost much higher than the $3,000 you spent in premiums. You might each maximize your eligible coverage in a given year, and take out $6,000 to $8,000 in benefit for that year. Not every year will you have lots of dental expenses and/or emergencies. In many years all you and your children will need is a basic checkups and cleanings. That would cost only about $400 – $500 per person. This would add up to $1,600 – $2,000 in paid out benefits. The insurance company then pockets the $1,000 plus in premiums as profit and reserves for future claims. Over time an insurance company will take in at least 30% more in premiums than paid out in expenses. They have to in order to cover operational expenses in running the dental insurance plans and to make a small profit. So, paying your dental costs out of pocket throughout your life would mean you keep that 30% extra as savings.

Pure costs can generate tax credits

Even if you don’t have a PHSP, you can still get immediate tax credits for dental expenses on your personal tax return. Each member of your family is eligible for tax credits equal to 3% of their net income or $2,024 per year (whichever is less) for medical expenses incurred during the year. Therefore, dental expenses you pay for out of pocket will reduce your taxes owing each year.

A PHSP can be a better alternative and more tax efficient

If you are incorporated you can set up a Private Health Services Plan (PHSP) to allow you to transfer 100% of all eligible dental and medical expenses to your corporation. These expenses are paid for by the corporation as a tax deductible business expense and the benefits are non-taxable to the employees and their families. It is one of the best kept secrets in Canada today; those self employed or small corporations can have their companies pay for health and dental expenses, create a tax deduction, and give employees a tax free financial benefit. Basically a pay-as-you-go plan with tax credits.

Pay-as-you-go will save money over your life

If you don’t have a group dental insurance plan, you might be better off just paying for expenses as you go through life. Setting up a savings account for extra expenses, like the new TFSA account, would be a great place to save money for many of the unforeseen dental expenses throughout life. Overall you would be able to save about 30% of those ongoing premiums if you can pay for expenses yourself. Then, accounting for the tax credits you would get for running the expense through a PHSP or getting regular tax credits for dental costs, you would be even further ahead. Unless you really want the peace of mind and monthly budget control that dental insurance can provide, paying your costs yourself is actually a better financial plan.

Contact Life Guard Insurance to review your family dental insurance plan

If you currently have a dental insurance plan, or you would like more information on getting one or a PHSP, feel free to contact Life Guard Insurance. We can help evaluate whether or not you would benefit from paying for dental insurance.

The article was written by +Mitch Reynolds. If you found this article interesting or it made you think, please feel free to share your comments below. Liking us on Facebook, giving us a +1 on Google or Tweeting this article Is Dental Insurance Worth the Cost? would be very much appreciated.