Author Topic: Supplemental cancer insurance . . . keep it or drop it?  (Read 1196 times)

Matt (Semper Fi)

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Supplemental cancer insurance . . . keep it or drop it?
« on: March 14, 2017, 08:14:24 AM »
Hello, fellow 'stachers,

I feel like I was duped about 11 years ago.  Our principal allowed an insurance salesman to set up shop in our faculty room, and being a real noob at the time regarding finances, I was sucked right in.  The rep. was offering a shiny, new calculator just for listening to his spiel!  He was hawking supplemental cancer insurance through Washington National (was Conseco at the time).  It sounded like a good deal at the time, since it has a return of premium with a 20-year maturity date.  Apparently (just found out today when I called the company, haha), I also purchased supplemental accidental death and dismemberment insurance, which also has a return of premium with a 20-year maturity date.  The cancer insurance runs about $71.00 per month, and the accident insurance costs about $33.00 per month.  For 11 years now, I have been seeing a $104.00 deduction on my pay stub for these two insurance policies.

I am a little bit torn as to what to do here -- I have already plugged about $13,700.00 in premiums into these policies.  If I hold them for 9 more years (to maturity), I could get back about $25,000.00 if I do not have any claims (return of premium is amount paid in minus any claims).  That being said, this money is not earning any interest, which bugs the hell out of me.  In fact, it bugs the hell out of me that I even bought this stupid supplemental crap, and apparently forgot about it until several months ago when I really started scrutinizing ALL of my financial house.

Bottom line:  Do I keep the insurance, and cash out in 9 more years with 25k (that has not been growing, other than the premiums paid in)?  Or, do I just drop the damn thing, kiss close to 14k goodbye, and instead invest the remaining 10k (in something like VTSAX, where a lot of my savings goes) that I would otherwise pay in premiums over the next 9 years? 

This may seem like a no-brainer to most of you, but I really hate to throw away the 14k.  But I guess this is insurance just like any other - we pay in money, and then hardly, if ever, use it.  I already have insurance through Blue Cross/Blue Shield, paid for by my school district.  Not sure if I really need this supplemental garbage.

I surely appreciate any thoughts on this from the Mustachian Collective.
« Last Edit: March 14, 2017, 08:16:29 AM by Matt (Semper Fi) »
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TheAnonOne

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Re: Supplemental cancer insurance . . . keep it or drop it?
« Reply #1 on: March 14, 2017, 08:25:04 AM »
If you cancel it, do you get a pro-rated amount?

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Captain FIRE

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Re: Supplemental cancer insurance . . . keep it or drop it?
« Reply #2 on: March 14, 2017, 08:36:30 AM »
$14k is a sunk cost, so put that out of your mind.

Can you see any other investment, where you can turn $11k into $25k in 9 years?

To calculate the future value of a weekly expense [ETA: for 10 years], multiply by 173.  $104*173 = $18k.  At this point, you are projected to make $7k more by continuing to pay this fee, plus you get some insurance with it to boot.  [ETA: This is actually for 10 years, not 9, so you are making a bit more than that.]

Per TheAnonOne, if you don't get prorated amount canceling early, I'd continue it out. 
« Last Edit: March 14, 2017, 12:58:44 PM by Captain FIRE »

TheAnonOne

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Re: Supplemental cancer insurance . . . keep it or drop it?
« Reply #3 on: March 14, 2017, 10:26:56 AM »
$14k is a sunk cost, so put that out of your mind.

Can you see any other investment, where you can turn $11k into $25k in 9 years?

To calculate the future value of a weekly expense, multiply by 173.  $104*173 = $18k.  At this point, you are projected to make $7k more by continuing to pay this fee, plus you get some insurance with it to boot.

Per TheAnonOne, if you don't get prorated amount canceling early, I'd continue it out.
Yea, if he can get some prorated amount, getting out now is best.

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dougules

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Re: Supplemental cancer insurance . . . keep it or drop it?
« Reply #4 on: March 14, 2017, 11:08:21 AM »
What does the cancer insurance cover?

cchrissyy

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Re: Supplemental cancer insurance . . . keep it or drop it?
« Reply #5 on: March 14, 2017, 11:40:55 AM »
agree the situation stinks, but try not to beat yourself up or dwell on the money already spent.

a better way to look at, as things stand right now, is:

1) stop paying $104/month.
vs
2) pay $104/m for 9 years and receive $25k

SimpleCycle

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Re: Supplemental cancer insurance . . . keep it or drop it?
« Reply #6 on: March 14, 2017, 01:51:57 PM »
Is it just me or is this a simple math problem?

Keep until maturity - pay $11,232 over 9 years to get a return of $25k.

Stop and invest money - invest $11,232 over 9 years, which at a 7% return yields $15,692 over 9 years.

Looks like at this point keeping it is the better financial move, assuming you are understanding how it works correctly.  The 11 years of lost growth is a sunk cost at this point.

Matt (Semper Fi)

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Re: Supplemental cancer insurance . . . keep it or drop it?
« Reply #7 on: March 14, 2017, 03:10:06 PM »
$14k is a sunk cost, so put that out of your mind.

Can you see any other investment, where you can turn $11k into $25k in 9 years?

To calculate the future value of a weekly expense [ETA: for 10 years], multiply by 173.  $104*173 = $18k.  At this point, you are projected to make $7k more by continuing to pay this fee, plus you get some insurance with it to boot.  [ETA: This is actually for 10 years, not 9, so you are making a bit more than that.]

Per TheAnonOne, if you don't get prorated amount canceling early, I'd continue it out.

It took me a minute or two, but I think I understand what you and other responders are saying:  I need to stop looking at this debacle as paying in 25k to get 25k back -- instead, from this point forward, look at it as paying 11k to get 25k.  I wouldn't have thought of looking at it that way, but it does make sense.  If I do keep the policy, I just have to hope that the company is still around in 9 years, haha.

One of my biggest regrets is that the supplemental insurance doesn't add a whole lot of value to what I normally get through my regular health insurance.  It sure sounded neat when the pitch was made, though.
Chance favors the prepared mind.

Matt (Semper Fi)

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Re: Supplemental cancer insurance . . . keep it or drop it?
« Reply #8 on: March 14, 2017, 03:11:14 PM »
If you cancel it, do you get a pro-rated amount?

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Hello AnonOne,

There is no prorated amount.  If you get out early, you don't get back any of the paid-in premium.
Chance favors the prepared mind.

Matt (Semper Fi)

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Re: Supplemental cancer insurance . . . keep it or drop it?
« Reply #9 on: March 14, 2017, 03:13:15 PM »
$14k is a sunk cost, so put that out of your mind.

Can you see any other investment, where you can turn $11k into $25k in 9 years?

To calculate the future value of a weekly expense [ETA: for 10 years], multiply by 173.  $104*173 = $18k.  At this point, you are projected to make $7k more by continuing to pay this fee, plus you get some insurance with it to boot.  [ETA: This is actually for 10 years, not 9, so you are making a bit more than that.]

Per TheAnonOne, if you don't get prorated amount canceling early, I'd continue it out.

Thanks for the feedback, Captain.  I'm leaning towards riding it out for the next 9 years -- once I can move past the depressing thoughts related to the sunk costs, the math does make sense in regards to keeping the policy.
Chance favors the prepared mind.

Matt (Semper Fi)

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Re: Supplemental cancer insurance . . . keep it or drop it?
« Reply #10 on: March 14, 2017, 03:16:54 PM »
What does the cancer insurance cover?

It covers quite a bit, but most of what it covers is actually redundant with my current health insurance through the school district. 
Chance favors the prepared mind.

cchrissyy

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Re: Supplemental cancer insurance . . . keep it or drop it?
« Reply #11 on: March 14, 2017, 03:49:43 PM »
yeah, my kid had cancer and everything was covered by, obviously, his health insurance.

Noahjoe

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Re: Supplemental cancer insurance . . . keep it or drop it?
« Reply #12 on: March 15, 2017, 12:48:14 PM »
Former Aflac District Sales Coordinator here. I'm reformed - promise. Usually these supplemental policies cover things like travel/mileage to hospitals, hotel stays involving said trips, and other incidentals that can add up to thousands of dollars if one ends up fighting cancer for a lengthy period of time. Things that normal insurance just doesn't cover. While I agree it wasn't a great purchase from the onset, at this point, particularly as you're aging, the fringe benefit of those things combined with the fact that you've paid in so much already makes it prudent to continue. And bad investment returns aside, if you bought this premustachianism you may have just spent that money anyhow ;) And if you hold a cancer policy and never had cancer...well that's always a silver lining.

Landlady

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Re: Supplemental cancer insurance . . . keep it or drop it?
« Reply #13 on: March 15, 2017, 01:03:25 PM »
Very anecdotal story here... My dad had not one, but two types of cancer last year. Having cancer insurance allowed my mother to maintain the household much easier when he was having extended hospital stays. They are both retired and have nice pensions and other savings so they didn't necessarily need the insurance, but it sure was nice for them get a fat check in the mail when there were so many other stressors on the mind. Also, selfishly, I'm glad they didn't have to burn through my inheritance.
Cancer is HARD on a family (understatement of the year). If I were in your shoes, I'd keep paying on it for the peace of mind.

msjd123

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Re: Supplemental cancer insurance . . . keep it or drop it?
« Reply #14 on: March 20, 2017, 03:12:48 PM »
I'm very familiar with those types of salespeople; they come to my school too.

I agree with what everyone else has pointed out about sunk cost. Are you sure your policy isn't also supplemental disability insurance? In CA, where I live, teachers don't pay into Social Security, which means we don't have disability insurance. I pay for supplemental disability insurance that sounds similar to what you've described (slightly cheaper though) because, at this point in our lives, we'd be screwed if one of us were unable to work for several months. If it IS a disability insurance policy, and you wouldn't otherwise have disability coverage, I think it's more valuable than you might think.

Rewdoalb

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Re: Supplemental cancer insurance . . . keep it or drop it?
« Reply #15 on: March 21, 2017, 08:12:23 PM »
Former Aflac District Sales Coordinator here. I'm reformed - promise. Usually these supplemental policies cover things like travel/mileage to hospitals, hotel stays involving said trips, and other incidentals that can add up to thousands of dollars if one ends up fighting cancer for a lengthy period of time. Things that normal insurance just doesn't cover. While I agree it wasn't a great purchase from the onset, at this point, particularly as you're aging, the fringe benefit of those things combined with the fact that you've paid in so much already makes it prudent to continue. And bad investment returns aside, if you bought this premustachianism you may have just spent that money anyhow ;) And if you hold a cancer policy and never had cancer...well that's always a silver lining.

I have neither bought or sold cancer policies, but my understanding is that (at least w certain companies) you simply get a cash payout upon diagnosis? So it's totally worth having the policy IF you get cancer EVEN if you have full health insurance.

Return of premium policies take the sting out if you never use the insurance. Terrible for mustachians obviously. I do, however, understand the argument that forced savings can be beneficial to people with poor discipline and savings habits. That said, OP, if you were less financially mature when purchasing this, it may not have been such a bad call, missed interest notwithstanding!

Better Late

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Re: Supplemental cancer insurance . . . keep it or drop it?
« Reply #16 on: March 21, 2017, 08:34:06 PM »
Mathematically it does make sense to keep it.
You may also want to read the coverage very carefully. We ended up using DH's supplemental cancer policy. While it covered a lot of the things our health insurance covered, it covered it at a higher percentage. It made a big impact on our overall out-of-pocket costs.