Why Insure Expected Risk?

If we don’t buy FAN BELT insurance then why do we buy insurance for routine doctor office visits? A routine office visit costs around $75 – $150 depending on who you see and the type of visit. Insuring a $75 benefit doesn’t make sense and ends up costing more.

Why do we insure dental benefits? We did a recent study for a municipality whose dental plan was fully insured by a major carrier. After careful review, the city was amazed to find they were paying $125 for a routine cleaning that cost $75. That’s a 66% increase over cost. The difference was premium and administrative expense cost. That’s insane.

Insurance is designed to cover the unexpected, not the expected. Otherwise it’s not insurance but an expensive form of financial lending. The insurance company lends you the money for expected events and collects it back on renewal.