Insurance is a unique service-based product that people purchase for peace of mind, yet usually hope to avoid using. Some disadvantages of buying insurance products are general and cover most categories of protection, while others are specific to particular sectors of the insurance market.
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Premiums and Costs
Premiums are costs to obtain insurance protection. Paying for something is an obvious disadvantage to any purchase, but premiums on insurance products are usually dependent on individual risk factors. Insurers base individual and family product premiums on potential risk of payout. Thus, people with the most need for protection and care are going to pay higher premiums.
Additionally, insurances like health and dental often include co-pays and co-insurances. Deductibles, which are amounts that must be paid by the insured before benefits kick in, are common to most insurance types. These expenses add to your total costs for services above and beyond premiums you pay your insurer for benefits protection, according to Always-Health.
Benefits provided by insurance products are a relief for the insured, but the process of obtaining benefits and the tough choices some insured people face can be difficult. Network insurance setups are usually flexible on providers, as long as you use one within your network, according to Startup Biz Hub. Some health and dental insurance products have more expensive or even limiting out-of-network benefits. This is a problem if you need services and do not have close access to a networked provider.
With some insurance setups, insured people may face high out-of-pocket levels and deductibles. This causes some to avoid receiving needed services to avoid expensive service payments.
Indirect Claims Process
In group network-type insurance setups like preferred provider organizations (PPOs) for health insurance, medical providers submit claims for services directly to the insurance provider, according to Always-Health. While this is convenient for the patient, it also leaves him out of the communication process regarding service designations and claims approvals. Your first opportunity to explain your use of services, related to coverage, is likely after a denial. You must rely on your care provider to accurately and effectively "code" your service as it relates to the coverage provided by your insurer.