The Insurance Bill You Never See
Picture a woman named Priya. She is fifty-two, she works in marketing, and her salary is $110,000. Her paycheck shows a deduction of $6,000 a year for her family’s health plan, and she thinks of that as the cost of her health insurance.
The plan costs $24,000 a year. The price of an insurance policy is called a premium. Her employer pays the other $18,000 straight to the insurance company, in her name. The money never touches her bank account.
That $18,000 is part of her pay. If she thinks her job pays $110,000, it pays $128,000. She just never sees the extra part.
Why does it go this way? If her employer paid her that money in cash, she would owe income tax on it and lose a quarter to a third. The tax rules make it cheaper to send it to the insurer before tax. The arrangement makes sense inside the system, and it hides the number.
Priya and her husband also pay for other cover. Car and home come to about $5,000 together. Life and disability come to about $1,800. Dental and vision come to $1,200, and the dog’s policy comes to $600.
She adds it up: $6,000, plus $18,000, plus $5,000, plus $1,800, plus $1,200, plus $600. The total is about $33,000 a year.
Priya has never seen that number on a single page.
You might wonder why she cannot ask to be paid the cash instead. The tax rules are written so that the cash would cost her more, and most employers do not offer it.
Other places price cover differently. For a household like Priya’s, insurance in central Mexico often costs more than seventy percent less. Some of that difference is price and some is what the cover includes, so it is worth comparing like with like.
You could add up your own year, including the part your employer pays or, after you retire, the part you pay yourself. Then you could set that number beside what similar cover costs in a country you are considering.
What does your insurance add up to? Tell us in the comments. Someone reading may not have added theirs yet.
Tell us in the comments