Is there such a thing as too much insurance? That may sound like an easy question. If an insurer is willing to cover you, how could you refuse? Well, many Canadians may have coverage for the same benefits under more than one plan. It's called dual coverage, or double insurance.
That's usually a good thing, but if you pay premiums on both plans, you can shell out more than you get back. But before you opt out, think about what benefits you use. Know the risks of leaving a plan before you say goodbye, because if may be tougher than you think to get back in.
What is Double Coverage?
Many Canadians have extended health insurance through their employer. Most group plans cover you, your spouse and your dependents. So, if you and your spouse both have workplace coverage, you may be entitled to similar benefits under both.
Are There Benefits to Double Coverage?
Under the coordination of benefits in many group plans, your secondary insurer can cover what your primary insurer does not. Often, benefits are only covered up to a certain percentage and up to a maximum amount per year. With two plans, you can end up recouping 100 percent of your out-of-pocket costs. If you depend only on your own or your spouse's plan, you could fall short.
How Does Coordination of Benefits Work?
Have a look at the coordination of benefits provision in both policies. This will stipulate how your expenses are reimbursed. Usually, you start with your own coverage first. The excess may be claimed under your spouse's plan.
Let's say your plan covers 70 percent of certain vision care expenses, and your spouse's covers 50 percent. You can get 70 percent of your costs reimbursed by your own insurer, and the remaining 30 percent through the other plan. You can't get back more than you've actually spent, and your plan's maximum dollar amounts still apply.
What about your children?
It depends on the plan, but your insurers can give you guidance. For example, they may say that the children's expenses are applied first to the parent who has the earlier birthday in the year.
How Can You Lose More Money Than You Get Back?
Most workplace plans require employee-paid contribution. If that is your secondary plan, you may get back less in reimbursements than you pay in premiums. Take a close look at the services you use, and how much you pay. You may find, for example, that you pay $500 in premiums a year but only get $100 total reimbursement from the plan.
Your pay stubs and HR department can give you an exact figure of how much you pay for your workplace plan. If you want to get down to the nitty-gritty of the math, you can also take into account the tax credit you may receive for the health plan contributions.
Should You Opt-Out?
Even if the math says a second plan isn't worth it, opting out is risky. It may be hard to opt back in. Fortunately, there may be a grace period if your spouse suddenly loses coverage for you to go back on your employer's group plan.
In the case of serious illness, you may want to access both policies. If you have already dropped out, you may have to undergo a medical exam before you get your coverage back.
Review Extended Health Insurance Options
It's important to know your coverage in order to get maximum benefits. To learn more about how insurance works for you, check out our resource hub on Insurance Hotline.