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Is Secondary Health Insurance Worth Buying?

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It’s common to see one with a secondary health insurance policy. Is it really worth getting one? Let’s read on to find out.

What is secondary health insurance?

Secondary health insurance is also referred to as supplementary insurance or personal insurance. In brief, it is extra insurance coverage you buy separately from a medical plan. It is dedicated to care and services that your primary health insurance may not offer. Depending on your policy, your secondary insurance can pay for out-of-pocket costs in case of severe sickness or injuries.

Secondary health insurance can be a dental plan, vision plan, accidental injury plan, etc. It serves as a backup plan to guard yourself and your family against a financial threat (an illness or accident).

How secondary health insurance works

Many people may wonder if having multiple insurance policies means getting reimbursed twice for a doctor’s visit. The answer is: even when you have more than one plan, the total amount you can expect to be covered will never surpass 100% of the cost. The thing here is that you need to understand the difference between primary versus secondary health insurance.

Primary insurance is the first insurance to pay for your bills. It will pay up to coverage limits. You may still have to pay for cost-sharing. Once your primary insurance has paid out, your secondary health insurance kicks in and pays for the remaining bill. In other words, secondary insurance is responsible for the other costs that have yet to be paid by primary insurance.

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It’s important to note that both plans will cover up to their limits. This means that as the secondary insurance has paid out, you still have to pay for any remaining amount (e.g., out-of-pocket medical costs) that weren’t covered.

The underlying principle behind secondary health insurance is pooling or spreading the financial risk. Imagine there are many people (i.e., policyholders) paying into a shared sum of money. When a policyholder faces an unexpected medical expense, the pooled money can help pay for it. This money also includes smaller, more routine costs. 

Secondary health insurance options

Clients can choose from a wide range of coverage options nowadays. The below table will give you a brief of the most common supplementary health insurance.

OptionHow it works
Vision planThis plan pays for routine prescription glasses or contacts and eye exams.
Disability planThere are plans for short-term disability and long-term disability. This insurance will pay out if you become injured or ill and unable to work for any length of time.
Accident InsuranceThis plan gives you a cash payout or lump sum if you suffer from any insurance. This money can be used to cover any medical bills or household expenses as resulted from your injuries.
Cancer PlanDepending on your policy, this plan pays out medical bills for several types of cancer.
Dental PlanThis plan includes preventive care (e.g., routine teeth cleanings). Depending on the type of policy that you own, you may use it to cover for certain kinds of specialized dental care. 
Hospital Care PlanThis plan is responsible for hospitalization fees should you suffer from serious sickness or other health conditions. The plan may provide policyholders with a cash payout to pay for the hospital bills.

What is not covered in secondary health insurance?

There are usually limits on coverage and services that insurers offer in these plans. Typically, supplementary health insurance plans will not pay for experimental or cosmetic services. This may vary from plan to plan, though. 

Where can you buy secondary health insurance?

If you work full-time for a company, your company is likely to offer you secondary insurance as part of the benefit package. According to The Commonwealth Fund, 67% of Canadians have complimentary insurance coverage through employers. This offers benefits such as vision and dental care, private hospital rooms and rehabilitation services, etc. You can also purchase secondary health insurance from private insurance companies.

Is secondary health insurance worth buying?

Thanks to a secondary health insurance plan, you can ensure your own protection. You may consider buying supplemental health insurance coverage if you are in one of the following situations:

  • Your company does not offer insurance for employees
  • Your group employee health coverage will no longer available when you retire
  • You do not work full-time for a company. You work as a freelancer or a part-time staff.

Having secondary health insurance means having a backup financial plan. However, insurance costs money. To answer this question, you need to calculate your financial needs and ability. Ask yourself:

  • What does your primary medical plan cover and not cover?
  • What is the coverage amount of your primary medical plan? Is it enough for you to cover for unexpected expenses?
  • Will you expect to need care that your medical plan doesn’t cover? Do you take part in extreme sports, or do you suffer regular injuries as part of your work or hobbies?

These are some basic questions for you to consider. As you manage to answer these questions, you may figure out if secondary coverage might be right for you.

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The bottom line

To sum up, secondary health insurance or supplementary insurance is an extra insurance plan for you to cover costs that are not paid by your primary insurance. 

To know if you need to buy one, think about what you already have in your primary insurance and ask yourself if you expect to need any further coverage in the future for specific needs (disability, accidents, cancer). If you need any professional help, don’t hesitate to leave comments below.

Frequently Asked Questions

I feel it’s unfair that sometimes the premium I pay more for secondary health insurance in a year is more than what I get back in benefits. Is secondary health insurance worth it?

We understand your point. It is true that sometimes, you pay a lot for your secondary health insurance, but you don’t use up its benefits. As we said earlier in our article, secondary health insurance works on a pooling principle: Many policyholders pay into a shared pool of money. When a policyholder is in dire need of money, the pooled money can help pay for it.
As the principle goes, in one year, some people may need more coverage than others. Therefore, they benefit more from claims payments. However, in the next year, things may work the other way round. No one knows what happens.

Is there any chance that my secondary insurance claim gets denied? What should I do in this situation?

If you feel that you are wrongfully denied your claim, you can take your complaint higher up within the organization. If things aren’t solved, you can resort to a personal attorney.
In most cases, your insurer will have to pay for any covered expenses according to your signed contract. If you buy insurance from a reputable company, the chances of getting declined are low. Therefore, you don’t worry too much about this.

Will I still have out-of-pocket costs if I have a secondary insurance plan?

Yes, you do. Basically, you have to pay for any premiums and deductibles for your plans. Your secondary insurance does not cover your primary’s deductible. In some cases, you may still have to pay for other cost-sharing or out-of-pocket costs, such as copayments or coinsurance.

What is gap insurance? Is it the same as a secondary insurance policy?

Gap insurance is a type of secondary insurance. It is also referred to as “limited benefits insurance.” Gap insurance provides policyholders with cash benefits. In other words, you can use it to pay for health care costs related to your deductible, copay, coinsurance, and other out-of-pocket medical expenses.

What are the pros and cons of having many health insurance policies?

On one hand, having multiple health insurance policies means having more coverage for medical costs. For people who own insurance through their company, a second health plan makes them more independent. In other words, they don’t have to worry about going uninsured should they lose their job and the health insurance that comes with it.
On the other hand, having more than one health insurance plan doesn’t mean you won’t have any out-of-pocket costs. You may still have to pay for any cost-sharing under plan rules (e.g., premiums and deductibles). Another limitation is that the combined coverage cannot exceed 100% of the cost.

Why do secondary health insurance plans cover just some but not all the cost?

Your secondary health insurance does not cover all the costs because the more coverage your insurance provides, the more premiums you have to pay. Insurance companies need to make sure that their premiums are affordable for different targets of clients. They need to balance what they cover (benefits) and what they don’t (exclusions). Fewer exclusions mean more insurance costs. If the premiums are too high, it’s hard for insurers to attract their customers. From the insurers’ perspective, they need to calculate the risks that they have to cover. Exclusion is one way for them to make sure that they can make a profit.

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