We buy insurance for many things in life. Insurance is the "promise of reimbursement in case of loss" meaning you pay for the insurance and if something happens, you'll be covered. You could get insurance for vehicles such as cars, trucks, motorcycles, boats, etc. as well as life insurance, health insurance, vision insurance, dental insurance, renter's insurance, homeowner's insurance, etc.

Is insurance really necessary? Absolutely. Without insurance, if something goes wrong, it could cost you a lot of money. For example, if you don't have car insurance and you crash into a tree, if the repairs cost $5,000, you have to pay $5,000. If you had insurance, you would only have to pay a portion of that in the form of a deductible.

What is an Insurance Deductible?

When you set up a policy with an insurance agent, you are charged premiums. You can pay these premiums annually or break them up to a monthly basis. The amount of premiums you pay will depend on the coverage you need, the risk you pose, and the deductible you have.

The deductible is the amount you pay first in damages, costs, etc. With the car example, if you had a $400 deductible and damages cost $5,000, you would pay the first $400 and the insurance company will pay the last $4,600. It is a way of reducing the potential liability to the insurance company which is why they will lower your premiums.

You may also set a deductible for health insurance as well. If you have high deductible health insurance, meaning you pay a certain amount of your medical bills, you will have lower premiums than if you had a low deductible.

At first glance, you can see great benefits to high deductible health insurance. The best benefit is that you have lower premiums. If you are buying your own health insurance, this is a huge benefit and can mean savings of up to thousands of dollars a year. If your employer pays your health insurance, it wouldn't make much of a difference to you premium-wise because you aren't paying them.

If you are a relatively healthy person who does not require a lot of medication or medical visits and care, having a high deductible is positive because you save on premiums but you don't have to pay much as far as deductibles. Those who are in this situation year after year, enjoy their health benefits because it is at an affordable cost.

Problems with High Deductible Health Insurance

Unfortunately, high deductible health insurance isn't all good. First of all, if your employer has a high deductible set for you, you get no benefit from lower premiums but you have to pay a deductible in times of medical need. You can, however, usually get access to a Health Savings Account with tax advantages.

Another problem, for the person who buys their own insurance, is for those who have high medical needs. You might not be the best candidate if you have a lot of prescription medications, make frequent doctor visits, and have other costly medical needs.

Even if you have relatively good health, high deductible health insurance tends to have its problems. Often those with this type of plan, if they do get sick or hurt, they avoid the doctor so that they don't have to pay the deductible. This is not the kind of risk you should be taking on your health, but it does happen.

Should you get High Deductible Health Insurance?

You really have to know your case. If you are dead set on lowering your premiums but you still want to be covered, it might be the right option. At the same time, don't ignore your healthcare needs to save a few bucks. If you ignore something serious and fatal, it won't matter how much money you saved.