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This Web site contains a compilation of more than a thousand consumer finance  columns written by Tony Novak from the 1980s through 2006, updated and reformatted for maximum usefulness today.  New material was added after 2010.

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"Think short term"

originally posted: 11/22/2006  reposted: 2/18/2011 This post has not been recently reviewed or revised by the author and may be out of date. If in doubt, please send a new question or ask for an update.

Q: Don't you feel your article is a little misleading then when you say that you can get children insured for $30 per month when in fact what you are proposing is only Short Term Major Medical rather that continuous coverage, which I am sure most parents are looking for.

A: Do not be so sure in assuming insurance buyer needs. Market data shows a different story. The median life of all health insurance policies purchased by individuals is only slightly longer than one year (13 -16 months, depending on the company reporting the data) and the median life of a policy purchased that includes continuous coverage provisions is less than three years. My own personal observation is that even buyers who directly state at the time of enrollment that they intend to renew a policy are unlikely do so. We estimate that I have assisted more than 25,000 people with these decisions over more than 20 years and this trend has been consistent over that entire period. It is easy to reach the conclusion that paying extra for continuous coverage provisions is a waste of money for many insurance buyers when lower priced policies are available in 6 month, 12 month and 36 month increments. "Think short term" is one of the best bits of advice we can give when looking for ways to save on health insurance since short term policies cost about 1/3 less than renewable policies. Financial advisers tend to encourage clients to think about the long term strategies. This is an exception. We have no trouble concluding that short term coverage is one of the most cost-effective strategies a health insurance buyer should consider in the recently revised article "Six Strategies for Cutting Health Care Costs". Keep in mind that most Americans do not purchase their own health insurance. When they do, it is usually for a temporary situation until a better option (employer-provided or public program coverage) becomes available. So as soon as other options are available, consumers are quick to drop individual health insurance policies. Remember also that short term medical insurance policies provide a "Certificate of Creditable Coverage" that enable transfers from one policy to another employer-provided or public program coverage in most states. In today's fast-paced world, this ability to transfer between different types of insurance policies is far more important than the right to renew a single policy. This assurance is perhaps the most important role of short term major medical insurance.


More resources:

article: "Six Strategies for Cutting Health Care Costs"