Buying Health Insurance: An Asset Or Just Another Expense?
The thought of buying health insurance for yourself or your family might have made you ask yourself questions like Is it merely an expense I have to commit to or is it an asset that will aid me when I need it? Pessimists will argue that buying health insurance is an unnecessary expense while optimists will convince you it is the smartest investment.
However, there’s no right or wrong decision when buying health insurance. To know whether this type of insurance is suitable for you, you need to research and know the facts about health insurance in Canada.
Let’s take a look at what health insurance offers and whether it is an asset or just another expense.
Difference Between Assets and Liabilities
First, we need to define the difference between an asset and an expense. To simplify the difference, anything that generates you money is an asset, while an expense or liability is anything that makes you pay for it. For example, your car can be considered both an asset and a liability as you spend money on gas and maintenance to keep it working while it holds some value that makes it an asset.
Real estate, cash, stocks, and bonds are some of the assets you may have while loans, credit cards, jewellery, and furniture are liabilities. When it comes to health insurance, you pay premiums regularly, making it more of a liability. On the other hand, when you save money during medical treatment, it is considered an asset. We know the expenses of health insurance, but let’s take a look at what it may offer to be considered an asset.
Medical Expenses Coverage
The main reason why we need health insurance is to cover the costs of medical treatments without worrying about our finances. You pay premiums to cover the costs of hospitals, surgeries, ambulance charges, routine check-ups, and critical illnesses.
Comparing the costs of these treatments against your premium will help you determine their value to you and if the costs that will be covered are higher, then health insurance is an asset for you.
To have a better insight into your expenses, look at the policy’s cost in Alberta and the average you will receive from the medical expenses coverage and you will know by then if it’s an expense or an asset. In most cases, health insurance is an asset and a backup for emergencies that can happen anytime.
Canada Revenue Agency (CRA) considers premiums paid to private health services plans including medical, hospitalization, and dental plans to be eligible for medical expenses. Additionally, any sales, premium taxes, or other expenses you pay to health insurance companies are considered eligible medical expenses by the CRA whether it was for you or your family. Keep into consideration that the plan you are on must be an eligible private health services plan to be deducted from your taxes.
The CRA has compiled a list of eligible medical expenses that you can check to see if your plan falls under these expenses. In a way, health insurance is putting money into your pocket by reducing the taxes you have to pay, and that makes insurance plans an asset.
There are a variety of health insurance plans that will suit your needs. However, the plans look complex with different options. Most health insurance plans fall into these plan categories: fee-for-service plans, high-deductible plans, managed care plans, and health share ministry plans. The premium for these plans differs depending on what the plans offer and your decision will determine if that plan is an asset or an expense.
Paying a premium for a plan that won’t meet your needs or make you pay more out-of-pocket expenses will be a liability, as you need to find benefits in exchange for what you’re paying. Putting some time and effort into researching the best health insurance plans for you and your family will most likely result in choosing a plan that will become a real asset.
To decide whether anything is an asset or an expense, you need to weigh its advantages and disadvantages. Paying for something monthly or yearly is considered a liability as our minds are still processing these payments to be gone with no benefits or for necessities only such as rent. However, health insurance plans offer benefits in many aspects that they will become an asset for anyone even if they didn’t file a single claim in a year as they can receive a no-claim bonus. Health insurance plans offer you peace of mind knowing you and your family are protected.