Dental insurance pays for preventative dental services (usually two to four cleanings per year), a portion of other dental expenses (fillings, crown, root canals, for example) and sometimes orthodontia. The amounts of these expenses covered depends on the The amount that you pay before the insurer starts reimbursing you either in part (see coinsurance) or in full. Deductibles can apply per claim (as is usually the case for auto collision and homeowners... More and The portion of each insurance claim, expressed as a percentage, you pay after you have reached the deductible and before you have reached your maximum out-of-pocket payment amount. Coinsurance is ve... More.
Every dental insurance plan I’ve had offered by employers has had a very low maximum, such as $1,500 or $2,500. This coverage differs from most other insurance products. Most other insurance products protect against things you can’t afford to lose, such as the injuries caused by a car accident or a tornado that destroys your home.
Dental Insurance Cost Comparison
Because dental insurance has such low limits, it doesn’t provide much protection against large dental bills. As such, the decision to purchase it is primarily a comparison of your premium with your covered expenses. Each year, I estimated my family’s dental expenses by type. That is, I considered how many family members get regular cleanings, what the visits would cost and how many of my children had braces. For this part of my analysis, I ignored all other dental expenses, such as fillings or root canals.
My dental plans always had the same coverage in and out of network, so the cost analysis was straightforward. Before doing any sort of cost-benefit analysis, you’ll want to make sure you understand how in- and out-of-network dental expenses are treated, determine whether your dentist is in the network and reflect the impact on your covered expenses. I applied the deductible and coinsurance to the expenses and compared the amount I estimated I would recover from the insurer with the premium. Networks, coinsurance and deductibles are all covered in my post on health insurance.
Discounts negotiated by the dental insurer with providers are another component of savings. Similar to health insurance, the cost of dental services provided by in-network providers when you have dental insurance can be significantly less than the cost if you don’t have insurance. This savings is difficult to quantify initially, but you can estimate it once you have used the same provider under a single dental insurer for a year or two. You can then include those savings in your analysis as a cost covered by the insurer.
How to Decide Whether to Buy Dental Insurance
If the premium and amounts covered by the insurer were fairly close or the premium was less, I would buy the dental insurance. If the premium was significantly more than the covered expenses, I usually took my chances that no one would need any expensive dental work.
As with all other financial decisions, the risk-reward trade-off is an individual one so you will need to decide for yourself how much extra premium you are willing to pay to have a portion of unexpected dental expenses reimbursed by the insurer. As you do so, remember that there is likely a fairly low cap on the total coverage provided by the insurer, so you’ll want to see how much of that maximum you’ll use up with your preventative and orthodontia expenses in evaluating that risk-reward trade-off.
I again want to thank Laura Kenney for her invaluable help with this post.