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Considering Dental Insurance? It May Not Be Worth It

May 10, 2016
Health, Insurance, Managing Health Insurance, Managing Medical Bills
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By Rachel Podnos, JD, CFP

Learn more about Rachel on NerdWallet’s Ask An Advisor

I always knew that dental insurance was not a good deal for people with healthy teeth and a limited need for dental care. Then I drove a snowmobile into a tree. Since then, I have had a multitude of complicated dental issues, which have caused me to incur close to $15,000 in bills for root canals, orthodontic treatment and fillings.

“Why didn’t I just get dental insurance?” I lamented to myself as I signed the dotted line on another bill.

I decided to shop around for a private dental insurance policy and read up on the subject. It turns out that most dental insurance policies are not a good deal, neither for people with healthy teeth nor for people like me who have a high need for complicated dental care.

Here are a couple of reasons dental insurance may not be worth it.

1. It’s not a good deal if you don’t use it

The majority of people who pay premiums for dental insurance far underutilize it. The average person doesn’t have need for regular dental services beyond one or two cleanings per year, and the national average cost for a cleaning is around $80. Dental policy premiums can range from $150 to $600 per year, with an average of around $300. If you go to the dentist only twice a year for cleanings, you will likely save money by simply paying for the cleanings out of pocket.

You might wonder, isn’t this just like health insurance, in which I’m also paying premiums but seeing a doctor only for annual checkups? Well, with health insurance (and auto insurance and homeowners insurance) you are paying premiums to insure yourself against the high cost of catastrophe. If catastrophe strikes and you do incur large medical bills, you pay only your deductible and a small fraction of costs above that amount; your insurance pays the rest.

But that’s not how dental insurance works — which leads us to the second reason dental insurance may not be worth it:

2. It may only be a marginally good deal if you do use it

With dental insurance, you pay a yearly premium — say, $300 — which gets you a maximum dollar amount of coverage. I shopped around plans in Washington, D.C., where I live, and several other cities, and could not find a dental plan with a maximum benefit of more than $2,000. For most, it was lower.

You may have a deductible to pay before coverage kicks in. After you’ve met it, your insurance pays a percentage of your dental costs; you pay the remainder, called coinsurance. The coverage stops entirely when the insurance company’s payout reaches that maximum benefit amount. Beyond that, you’ll pay 100% of your costs out of pocket. And the two annual cleanings often “included” in a plan count toward your max.

The average cost of a root canal in the U.S. is around $900 (it can be twice that in D.C.). Thus, if you have complex problems, you will likely exhaust your dental coverage quickly and end up paying out of pocket for a large portion of your care. That is on top of paying premiums and the coinsurance.

In addition to your benefit being limited to a maximum of about $1,000 to $2,000, you’ll be trading away the potential to pick your dentist of choice (and location) and perhaps negotiating a price, all for the benefit of saving a few hundred dollars.

Even for routine dental issues, many of the best dental practices don’t accept insurance at all. By signing up for this coverage, you may be limiting your care to dentists you won’t like.

Considering all this, while it is possible that having dental insurance could save you money, it is also totally possible that you would be better off paying for your care out of pocket. Take a good look at the benefits of dental insurance policies and do some rough math to decide whether it will likely be a good deal for you, rather than just assuming it is a good idea because it is insurance.

Rachel Podnos is a fee-only financial planner with Wealth Care LLC.