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Dental plans make sense for almost everyone who goes to the dentist twice a year for regular check-ups. If rates are reasonable, the annual premium should cost you no more than the cost of the basic services without the insurance. Then, if you require some additional x-rays, a couple of fillings, or a capped tooth, having dental insurance can help save you money.

How Does It Work?

You are covered for certain eligible expenses during a plan year, up to an annual maximum (usually limiting your coverage to no more than $2,000 to $3,000 in a plan year, depending upon your particular plan).

You can have a traditional indemnity type plan which allows you to choose your own dentist. The plan either reimburses you or you can assign your benefits to your dentist, depending upon the payment arrangements you make. Annual deductibles typically apply to all services except preventive and diagnostic care. Coinsurance varies, depending upon the particular service rendered and the plan's schedule of coinsurance. And, like traditional medical insurance, these plans use "reasonable and customary" charges to pay benefits.

There are other dental plans such as preferred provider organizations (a Dental PPO) that also allow you the freedom to select your own dentist. However, if you use a network dentist, you will receive certain services at a discount, resulting in lower out-of-pocket expenses. They have deductibles, just as indemnity plans do, but they reimburse you based on a schedule of benefits. Annual deductibles typically apply to all services except preventive and diagnostic care. Regardless of where your dentist is located, there is a maximum benefit you can receive per procedure.

IMPORTANT NOTE: If you live in an area where costs exceed the national average, you may have to cover the portion of your dentist's fee that exceeds the plan's schedule of benefits.

Another type of dental plan is a Dental Maintenance Organization (DMO). A DMO operates like a medical HMO. You choose a dentist from the DMO during the annual enrollment period at your company. A typical DMO has no annual deductible, no annual maximum benefit, and no reasonable and customary charges. Many of the procedures are covered at 100%, while some of the major services may be covered at 60–70%. Your DMO dentist is responsible for your dental care and also makes referrals to specialists within the DMO.

What Services Are Typically Covered in a Dental Plan?

*The deductible is usually waived for these services.

**Orthodontic services are usually limited to a lifetime maximum, except for DMOs.

Should You Buy Dental Insurance?

If you go to your dentist regularly, it generally pays to have dental insurance. But the real answer depends on the cost of the monthly premiums and the condition of your teeth. It's usually worth signing up for the coverage, as long as you go for semiannual checkups, even when your teeth are in great condition. This is because the cost of preventive care alone can be almost as much as the cost of the premium.

The table below illustrates an example of the annual cost of preventive care and the annual cost of dental coverage. In this scenario, the cost of the family premium is $14 per bi-weekly paycheck paid on a pre-tax basis.

*Assumes no tax benefit because of the 10% AGI limitation.

**Assumes 25% savings on income tax and 7.65% savings on FICA.

***This amount could be set aside in a health care reimbursement account to reduce the net cost through tax savings, making both net costs the same.

Let's review: There is no deductible for preventive care. The out-of-pocket costs are nearly the same. But since an employee pays premiums with pre-tax dollars, he or she actually has to earn less to pay the same dental bills; unless, of course, the employee sets aside money in a Health Care Reimbursement Account. In that case, the cost with insurance and without insurance is about the same.

However, there's a significant advantage to having insurance: If you require basic and major services, in addition to preventive care, your out-of-pocket costs without insurance can rise sharply. Assuming you need one or two fillings, and a possible root canal, your out-of-pocket costs for the year can skyrocket without insurance. So, even though you have an annual limit on covered dental expenses, insurance provides you some upside protection.

SUGGESTION: If you select a dental plan other than a DMO and the dental work is major—(it exceeds the annual limit and is not an emergency), arrange to have the work split over two or more years. You'll generally be able to recoup more of your expenses.

The dental plan you select should not be based on price alone. Consider the condition of your teeth and the amount of dental work you and your family will require in the coming year.

Buying an Individual Dental Plan

Buying a dental policy on your own can be costly. The premiums are typically higher than those offered under a large group plan and the annual benefit limits may be lower. There is typically a waiting period before you are eligible for basic and major services. This is the insurance company's way of discouraging people from signing up only when they require expensive dental care and dropping coverage immediately thereafter.

Orthodontia services may not be covered or may have a waiting period of several years before you are eligible for benefits. If orthodontia is covered, there may be a lifetime maximum amount payable under the plan.

If you're self-employed, be careful when purchasing your own policy. Make sure you understand the policy's limitations before you decide if it is worth the premium.

SUGGESTION: If your spouse is self-employed, put him or her on your dental plan as a dependant before looking at a separate individual policy. On average, the benefits will be better and the premiums will be lower. If your spouse works for a company with a dental plan and you're considering self-employment, go on your spouse's plan as a dependent.