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Insurance policies are designed to shift the risk from the insured to the insurer. However, shifting too much risk to the insurer can raise your price more than the additional “security” is worth.

Most consumers know that the more risk they take, the lower their premiums. For example when all else is equal, the policy with the higher deductible is going to be less expensive. The policy with the low deductible is, conversely, going to be more expensive.

Your price for insurance goes down when your share of the risk goes up. This is no secret. What is not known as widely is the price does not go down at the same rate that the risk goes up.

Do you remember playing on a seesaw as a kid? Do you remember adjusting the fulcrum when a bigger or smaller kid wanted to pay with you?

On a properly adjusted seesaw the bigger kid goes down when the smaller kid goes up, but not at the same rate! This is the way it is with insurance. Often, when your deductible goes up a little, your price goes down a lot.

High and moderate deductible policies are almost always better bargains when compared to low or no deductible policies. This is true for health insurance policies. It is also true for car insurance policies and homeowners’ insurance policies.

You not only cut your health insurance cost in half by taking a moderate or high deductible policy but you can also increase your long-term savings. To reduce your risk you can put the money you save into a savings account or investment. If you choose to purchase a policy that is health savings account compatible, you may be able to do so on a tax-free basis. If your health care expenses are low over the years, you may build up a good nest egg.

If you currently have a low deductible insurance policy, do three things. Determine your potential savings by subtracting the ANNUAL cost of a policy with a higher deductible from ANNUAL the cost of your current policy. Calculate the additional risk you will take on if you took the less expensive policy. Subtract the potential annual savings from the amount of additional risk.

The answer to the above equation will tell you whether you should purchase a higher deductible policy or not. Let your calculator help you make the right decision regarding which health insurance policy to purchase.

You can view Connecticut health insurance rates on your site. You can get your medical insurance questions answered by calling 1-800-467-8726 or 1-203-374-3645.

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Alston

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