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When considering Medigap policies, one of the primary concerns is the cost of the premiums, both currently and into the future. Depending on the type of Medigap coverage, costs of Medigap policies can vary both between the different types of policies and between insurance companies selling the same type of coverage.
While Medigap policies are regulated so that one type of Medigap insurance will include the same features regardless of the insurance company selling it, prices for the same product can vary widely between different insurance companies. It is important to be aware of how any given insurance company prices its Medigap options, as what may seem to be the most cost effective option when first purchased may end up being the most expensive as you age.
Insurance companies can price Medigap policies 3 ways, although some states restrict these policies to one or two choices instead.
1. Comparing Medigap Policy Costs: Community Rated Policies
This option is also called the no-age rated Medigap policy, precisely because the premium costs of this option are the same for everyone, regardless of age. The premiums on this one will never increase as your age increases, although they may increase due to inflation or other, non-age related factors. This can be the least expensive option over time, although not necessarily the least expensive option at the time of purchase when compared to the initial cost of the other two options for younger buyers.
2. Understanding Medigap Costs: Issue-Age Rated Medigap Policies
The costs of Medigap policies of this type are calculated based on your age at the time that the policy is issued. As such, it is likely to be less expensive for younger buyers, making it an attractive option if purchased early in the Medicare years. The cost of this option is higher for older candidates, but once purchased, the premium prices do not increase again because of age. Like the community rated option, premiums may increase because of inflation or other non-age related factors. Depending on your age at the time of purchase, this may be the most cost-effective type of Medigap policy for you.