The irrational fear of deductibles and large numbers

Does a $5,000 deductible make you freak out and make you wonder "why the heck am I paying a monthly insurance premium when I have to pay the first $5k of my medical bills?!" Well, you're not the only one. The trouble we have though is asking ourselves, is this assumption really rational?

I think it all boils down to the fact that we like it when other people pay for things. It is much easier to pay an insurance company $100/mo more just to save ourselves $50 on a doctor visit, because when we went to see the doctor we didn't get a bill. We do this all of the time with all sorts of products. Vehicles, Television programming, insurance, furniture, etc. We finance those purchases and break them into monthly costs because we get what we want now and then just pay a little bit later on. Had we been a little more savvy we would have saved our money up, paid cash for the purchase and saved ourselves the extra interest payments and negotiated a better deal.

In order to get over our irrational fears we need to take a step back and think about what insurance really is. It is a safety net meant to help protect us from large financial losses. Insurance companies don't want you to be in a better position after you have submitted claims to them, they just want to make sure you aren't in the worse position. If we were all better off submitting insurance claims we would be looking for ways to profit from them constantly. (some people try, but then they go to jail)

If insurance is there to protect us against large losses, then it makes sense to have a deductible and your monthly payment you pay will determine how much of a deductible you will have. If you can't afford paying $5,000 in medical expenses, maybe consider paying more for your insurance. The trouble is that if you can't afford the higher insurance premiums, then having a higher deductible isn't a bad idea. How often will you meet that deductible? Do you incur medical expenses every year? If so, how much do you really incur? A regular doctor visit might cost you $100. A prescription drug maybe $20 for most people. Insuring yourself against those smaller expenses might not make sense as you pay an additional $100/mo for a policy that gives you a $50 copay to see a doctor as opposed to you paying the entire $100 for that same visit.