Understanding Medigap Insurance Ratings

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Before you fully commit to signing up for a particular Medigap policy, it pays to know about the different Medigap insurance ratings. For those seniors seeking additional medical coverage that supplements Medicare, Medigap is a good choice. However, the way Medigap is structured appeals to a wide variety of applicants. Once you learn about Medigap ratings, you can choose the best plan for you.

Medigap insurance plans are offered by private insurance agencies, although the conditions of the policy are heavily regulated by state and federal laws to ensure uniformity. Premiums for Medigap insurance can differ from agency to agency, and one of the ways used to calculate the premiums for an individual is via a ratings method. There are three ways that Medigap policies are rated and each one offers benefits and drawbacks when it comes to the cost of a policy.

The first rating method for Medigap insurance is the attained-age-rated policy. The rates for enrollees are determined by age. When you first enroll, generally at age 65, the premium is comparatively low. As you age, the premium will increase. The advantage to this type of rating is that for the first several years, you could be paying an extremely low monthly cost for the policy. However, as the rates increase as you age, you may end up paying more per month that you would if you've chosen another plan. You would have to decide if the savings would balance out the higher cost in the end. You may choose this kind of plan if you took the amount you were saving in the early years and invested it in something with a mid to high yield so that money would continue to work for you as you aged.

The second rating method for Medigap insurance policies is known as a community-rated policy. An insurance company will set rates for a certain area and charge the same of everyone, regardless of age. If you live in an area that has a fairly low community-rated policy, you could realize a significant advantage by enrolling in this kind of plan. You will also be able to budget easily, as your monthly premium will not change over the years. One disadvantage of this kind of rating method is if your area has an unusually high rate set by the insurance companies. You could be paying out a lot compared to other plans that are centered on you alone.

The third Medigap insurance rating method is the issue-age-rated policy. A premium is calculated based on the age at which you purchase the policy. However, the rate will not increase as you age. The advantage of this is that you'll get a fairly set rate that will not be subject to change every year or so. If you purchase the policy at a fairly young age, you could get at a lower rate compared to if you purchased a policy several years later. If you are older when you pick up a policy, you may be paying more than you need to compare to other plans.

Note that all insurance premiums will increase over time as companies adjust rates to stay competitive, match market rates and compensate for inflation. However, if you study up on these Medigap insurance ratings plans and understand exactly how they are figured, you'll be better equipped to make the initial decision of what kind of policy applies to you, as well as head off any surprises with rate increases Down the road.

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Source by Jaceson Maughan