Insurance

QUESTION: Amy just realized their health insurance has a health savings account (HSA) option. They are in Baby Step 2, and she has a unique idea for saving money. Dave gives Amy his thoughts on their situation.

ANSWER: There are two components to an HSA, the insurance component and the savings component. You don’t have to participate in the savings component. The insurance component is simply a large deductible, 100 percent coverage after the deductible, cheaper-premium health insurance plan.

I would not do the savings component if I were in Baby Step 2. I would only do the insurance component, or I’d do the medical sharing program. I’m not sure why you’d need to jump back and forth if you’re going to permanently move to a medical sharing program. I get the idea of saving money, but I wouldn’t recommend your idea for someone who’s in debt. I wouldn’t fund a savings account of several thousand dollars only for medical when you’re not even on Baby Step 3.

It’s not the end of the world if you don’t fund the HSA portion of your current insurance plan. If you went with a medical sharing program, and just saved up a large emergency fund, the only thing you’d really lose out on is the tax deduction associated with an HSA.

QUESTION: Tommy is thinking about buying a return of premium life insurance policy, and he asks Dave if they’re too good to be true.

ANSWER: It’s not too good to be true, Tommy. It’s a rip off. Never do return of premium policies.

If you were to take that extra money you’d be paying and put it into a good mutual fund, you’d get all the cost of your policy back after 30 years 100 percent of the time. Return of premium policies are completely an insurance gimmick. They’re crap.

When it comes to life insurance, always go with a good, 15- to 20-year level term policy. And always avoid return of premium. That’s the deal.

QUESTION: Brenda asks if she should keep buying dental insurance for her kids. Dave suggests a better option.

ANSWER: Dental insurance is one of those things where it’s easy to see that they’re charging you for more than you’re getting in return. We’ve had dental insurance proposed to us at my company several times as an employee benefit. When you add up what you pay for it in a year, you’ll rarely spend that much on dentistry.

There’s a dental discount company I highly recommend called 1Dental.com. That’s worth it. As a member, you get discounted rates on dental work. I’ve gotten to know the folks behind this organization, too, and they’re great people.

QUESTION: Craig asks if it’s a good idea to get mortgage disability insurance during Baby Step 2. Dave advises against it and offers a better alternative.

ANSWER: No. Mortgage disability insurance is a gimmick. I would have long-term disability insurance — period. I wouldn’t buy insurance just on a mortgage, or just on loans.

Long-term disability insurance is fairly inexpensive in most cases, especially if you get it through work.