What Is Gap Health Insurance? All You Need to Know in 2023

Updated · Mar 06, 2023

If you’re like most people, you were probably looking for insurance with the highest possible coverage and the lowest premiums.

But did you consider the deductible?

And what about the copayments and coinsurance?

Can you cover all out-of-pocket expenses before your insurance kicks in?

Gap health insurance can help you with that.

Read on to learn how it works, what it covers, and whether you need it.

What Is Gap Coverage?

Gap health insurance is a type of policy that fills in the “gaps” in your regular coverage.

It is supplemental health insurance, typically purchased alongside a high-deductible health plan (HDHP).

According to the IRS, an HDHP is a policy with a $1,400 deductible for individuals and $2,800 for families.

HDHPs offer coverage only after you have paid this out-of-pocket amount. Gap health insurance policies provide coverage before you have met the deductible.

Hence, it can help you cover your expenses before your insurance kicks in.

While it can be useful if you're between jobs or insurance plans, it can’t replace your primary individual health insurance.

Other policies are better suited for that purpose.

Gap vs. Short-Term Health Insurance

Short-term policies can fill in a temporary insurance coverage gap. This is a temporary solution when you have no main coverage plan.

You can get short-term insurance if you lose your job or can no longer afford your regular insurance.

In contrast, gap coverage is most useful when combined with your primary plan.

Gap Health Insurance vs. Guaranteed Asset Protection (GAP) Coverage

This is another term you might confuse with gap health insurance.

But guaranteed asset protection is car insurance, not health coverage. If your car is totaled or stolen, a GAP policy will cover the difference between its value and the amount you still owe on loan.

But let's get back to the meaning of medical gap insurance.

How Does Gap Health Insurance Coverage Work?

If you have an HDHP or another plan with high deductibles, gap insurance is a great way to supplement it.

Sure, your monthly premiums will be higher, but it’ll lower your medical expenses significantly.

You can use it to:

  • Increase your healthcare coverage - You’ll receive a cash benefit for covered medical expenses, accidents, and serious illnesses.
  • Covering your out-of-pocket expenses - The insurance company will pay out a lump sum. You can use it to cover deductibles, copays, and coinsurance costs.
  • Cover non-medical expenses - Payments go directly to you. This allows you to spend the money on whatever you need, even things like rent, food, transportation, etc.

What Does Gap Health Insurance Cover?

Gap coverage is sometimes called "insurance for your insurance." It has limited benefits, so it’s best if used together with another plan.

Gap policies don’t meet the requirements of the Affordable Care Act. As such, they lack some essential benefits, such as mental health, pregnancy, childbirth, and preventive care coverage.

Instead, gap insurance covers things like accidental death & dismemberment, critical illness, and accidental medicinal insurance.

Although the list of conditions to receive the funds might be slightly shorter, there are virtually no limitations on how you spend the money.

Do I Need Gap Health Insurance Coverage?

Gap insurance is suitable for you if you have a health insurance plan with high deductibles.

If the out-of-pocket expenses are more than you can afford, gap coverage can help you with that amount.

In addition, gap insurance is particularly helpful if your main policy doesn't cover the health services you need.

Lastly, it can be helpful if you are between jobs or insurance plans.

That said, short-term medical insurance might be more suitable for those instances.

Wrap Up

Gap health insurance is a great way to cover your out-of-pocket costs.

We recommend it if you have an HDHP or another plan with high deductibles.

It's also a good option if your regular public or private health insurance doesn't cover the types of services you need.

However, this type of coverage can’t replace your regular insurance. It's best used as a supplement to it.

Aleksandra Yosifova
Aleksandra Yosifova

With an eye for research, Aleksandra is determined to always get to the bottom of things. If there’s a glitch in the system, she’ll find it and make sure you know about it.