The lump sum versus payments for medical insurance expenses are often misunderstood. One of the most common mistakes made is assuming that “Lump Sum” refers to a large sum paid out over time. The truth is that the term is actually short for a lumpsum payment. Instead of receiving a single lump sum payment for your entire medical bills, you will in fact receive payments throughout the life of the policy. It’s important to understand that these payments are not tax deductible. Instead, they are meant to supplement the benefits provided under the insurance plan.

Lump Sum versus Payments for medical insurance expenses are actually not the same as they’d be under the regular varying rates situation. Under normal circumstances, a policy might offer a premium, a savings benefit, and possibly a reimbursement benefit at the end of the policy. There is no guarantee that you’ll ever see this money, as it might be subject to the annual inflation rate, which can be as high as 5%. This means that over the long haul, lump sum payments can significantly reduce your actual cost of medical insurance.

Another key difference between Lump Sum versus Payments for medical insurance is that Lumpsum payment is not actually interest paid on the policy. Rather, the value of the sum is determined at the beginning of the policy and is then held in a savings account just like any other savings account. Any increase in the value of the account is applied to the increasing value of the lump sum. This means that the longer you hold the monetary value, the more it will impact your financial management.

A third difference between Lump Sum versus Payments for medical insurance expenses is the possibility of having the lump sum payment returned. As you may know, in some cases the federal government requires that you reimburse the full value of any unused funds. While some plans are very generous in allowing their members to have these extra payments, there are many plans that allow the value of the money to be deducted from your gross income before tax time. If you are in a situation where you are simply repaying all of your debt, without any additional funds available, then you could find that the IRS will take away the excess amount that you would otherwise be paying if you had taken the deduction. The bottom line is that it’s always better to pay taxes upfront versus receive a refund.

In comparing lump sum versus payments for medical insurance expenses, you will also want to consider the effect of inflation on your monthly costs. While most people won’t face significant increases in their costs over time, the elderly and young can have an increase in their costs that they may not be prepared for. Even the smallest increases can have a huge impact on your ability to pay for medical expenses in a timely manner. For this reason, you should also compare the effects of inflation on the amount of money that you would have paid in previous years when you were paying your premiums on a monthly basis.

It is also important to understand the relationship between interest rates and the amount that you have to pay out as a result of a capital structure. You should understand that if the interest rates on your mortgage or your car loan are higher than the rate of inflation, then you are going to need to make up the difference with more lump sum payments. The bottom line is that you should understand what the implications of lump sum payments are when you are comparing them with other financing options like interest only payments, traditional mortgages or car loans with fixed rates.