Everyday Cheapskate: Extra Money Dilemma; Should We Buy Cancer Insurance?
For example, does it become secondary to your primary health insurance, paying out only after all of your other resources are exhausted?
Or does it pay a per-day rate regardless if you are admitted to the hospital or have other coverages?
Is it expense-based (covering a percentage of qualified charges) or lump-sum based (pays a specific amount and that's it)?
While cancer is a horrible disease that we hear about a lot, the chances of you getting it are quite low. According to the National Association of Insurance Commissioners, cancer treatment accounts for 10% of all U.S. health expenses. That means there is a 90% chance you will never need this coverage.
Disease-specific insurance is a luxury item you should only consider if you have the essentials in place:
Do you have adequate health insurance that covers all health issues?
Do you have disability insurance? Statistically speaking, at your ages, you and your husband have a much greater chance of being disabled than getting cancer.
Do you have an emergency fund with enough money in it to pay your bills for six months in the event of unemployment?
Are your unsecured debts paid in full (credit-card bills, student loans and other non-collateralized loans)?
If you answered "yes" to all of the above -- and can easily afford disease-specific insurance -- cancer insurance may be a luxury item you wish to own. Before you make your final decision, you should do some math I did. This is what I discovered:
Let's say your monthly premium is $50 for this insurance, and you decide to save that amount instead of buying insurance and have it automatically deposited every month into a mutual fund account that averages 10% growth (not unusual these days) until you are ages 72 and 75. You will have $114,958 in the bank -- nearly $97,000 of that amount coming from growth.
Remember, insurance is a gamble. The company is betting that you won't file a claim and they'll get to keep your premiums. When it comes to cancer insurance, they have a 90% chance of winning.
The NAIC offers a free "Shopper's Guide to Cancer Insurance" on their website that discusses this in greater depth. I hope that helps. It was great to hear from both of you.
Mary invites you to visit her at EverydayCheapskate.com, where this column is archived complete with links and resources for all recommended products and services. Mary invites questions and comments at https://www.everydaycheapskate.com/contact/, "Ask Mary." Tips can be submitted at tips.everydaycheapskate.com/. This column will answer questions of general interest, but letters cannot be answered individually. Mary Hunt is the founder of EverydayCheapskate.com, a frugal living blog, and the author of the book "Debt-Proof Living."
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