Are Dental Insurance Plans Money-Savers or Shell Games?

Buying dental insurance is not required by law as with other forms of coverage. Therefore, you have to decide for yourself if purchasing a plan makes sense.

Profit-seeking companies issue the coverage. By design, they charge more than they pay out in claims. Therefore, the plans wind up fleecing most members – right?

On the surface, dental coverage can seem like an awful deal because waiting periods, annual maximums, and copayments mean they cover only a small portion of high-priced major services.

However, by digging deeper, you can find three hidden ways that dental insurance can cut your costs for oral care, which makes it worth having instead.

Why Dental Insurance Seems So Bad

Dental insurance often seems like a lousy place to spend your money because the issuing companies design the plans to make money for them – not the members. After all, that is their purpose for being in business.

However, they have to sell a decent product at a reasonable price to get consumers to opt-in instead of financing their dental work. Therefore, they limit benefits because people do not get direct help with premium payments as they have come to expect with health insurance.

Covers Little

Dental insurance covers only a small portion of expenses because people demand low prices. The richer the benefits, the higher the premiums will be, and vice versa.

When deciding whether it makes sense to buy a policy, people can easily measure the cost but have great difficulty estimating the future value.

  1. The predetermined premium cost is a defined amount that you pay each month throughout the life of the policy.
  2. The benefits returned are uncertain and difficult to quantify because the claim payments hinge on future oral care treatments, and three factors determine the amount.
    1. Waiting periods
    2. Annual maximums
    3. Copayment percentages

Waiting Periods

Waiting periods and missing tooth exclusions can cause people to think their dental insurance does not cover anything at all. People would like to buy a plan that pays thousands of dollars in claims right away for something they already know they need.

However, put yourself in the shoes of the issuing company. Would you trade a hundred dollars in premiums to pay an expensive claim fifteen times the size? Of course not; that would be absurd.

The companies use waiting periods to keep the costs attractive for the members who want to buy real insurance: a policy that protects them against future unforeseen oral care problems – not treatments they know they require.

Annual Maximum

The annual maximum is perhaps the biggest reason why people complain that their dental insurance covers so little. The feature limits what the plan pays in claims in a single year, and keeps the premiums more reasonable for others.

For example, a typical annual maximum could be $1,000 or $1,500 per person. Dental insurance does not pay benefits for catastrophic events as with other familiar forms of coverage.

  • Unlimited healthcare costs to battle a dread disease
  • Amounts needed to rebuild your house after a fire
  • Long-term care in a nursing home or assisted living
  • Collision damage to repair a car after an accident
  • Liability payments for pain and suffering of others

Many patients cannot afford expensive treatments – even with dental coverage already in force – because the plan stops making claim payments.


Sliding-scale copayment percentages also lead many members to conclude that their dental insurance does pay much overall. A copayment is the percentage of the allowed charge the member must fund out-of-pocket.

A typical design might have these copayment configurations.

As you see, many plans will pay only half of the allowed charges (see discounts below) for the big-ticket treatments – leaving the patient to fund the remainder.

Unsupported Costs

Dental insurance can look like a terrible investment without help paying the premiums as with medical insurance. Sometimes, consumers expect the two types of coverage to work the same way – even though they do not.

Most members must fund 100% of the costs by themselves, with no provision from their employer or the government.

  • Employers often pay a large portion of the premiums for group health coverage as mandated under the Affordable Care Act. The legal requirement can make it harder for employers to contribute to their group dental plans as well.
  • The federal government provides income-based subsidies that lower premium costs for individual health insurance. However, these financial supports do not extend to stand-alone dental coverage.

When Dental Insurance Proves Worthwhile

On a surface level, dental insurance would be worth buying if the benefits paid out exceeded the premium costs needed to maintain the coverage. However, you have to dig deeper to find three hidden ways you could be saving money before arriving at a reliable conclusion.

Plus, having the coverage provides peace of mind. What is the value of being able to sleep at night, knowing that your oral care is in good hands?

Network Discounts

The discounts offered by in-network providers are the most overlooked money-saving feature of PPO and DMO dental insurance designs. After each completed claim, the plan will publish an Explanation of Benefits (EOB) statement that reveals the hidden cost reductions.

The EOB should include three crucial figures.

  1. Provider Charge: the inflated retail price offered to self-pay patients
  2. Allowed Amount: the reduced wholesale fee charged to members
  3. Member Discount: the total saved by using a participating provider

Having insurance is the easiest way to negotiate lower prices from your dentist, which is worth its weight in gold. The issuing company already did the bargaining on your behalf, only with the power of large numbers behind them.

Costs Avoided

Having dental insurance in force motivates you to maintain good oral hygiene. Healthy teeth and gums help you elude costly problems in the future, which saves you a bundle of money – not to mention pain and a diminished smile.

Most plans cover preventive care at 100% to promote wellness.

  • Two to three cleanings (prophylaxis) each year
  • Two exams to check for signs of tooth decay and gum inflammation
  • X-rays to detect problems invisible to the human eye

Also, many plans pay for basic restorative care (amalgam and composite fillings) at 80%. The idea is to stop small cavities from growing into bigger problems later on. Caries left untreated can lead to pain, abscess, and tooth loss.

In turn, tooth loss can bring on the need for more expensive procedures such as dentures or implants. Stopping problems before they happen is always a good idea.

Tax Reduction

Dental insurance premiums sometimes reduce taxable income, which represents the third hidden way you could save money and make the math work in your favor.  A one-third drop in net cost alters the value equation considerably.

Pre-Tax Payroll

Pre-tax payroll deductions are the ideal way to pay dental premiums – if your employer offers a Section 125 Cafeteria Plan. Pre-taxing reduces the amount of income subject to three types of levies and does not require you to meet any threshold before the savings begin.

  • Federal varies by bracket
  • State if applicable
  • FICA (up to 7.65%)


The self-employed and other small business owners can deduct dental insurance premiums on IRS Schedule C: Profit or Loss From Business. The business expense reduces the annual profit subject to taxes and does not impose a threshold before you can recognize the savings in taxes due at the end of the year.

Itemized Deductions

Only a minority of W2 employees will be able to deduct dental premiums on IRS Schedule A: Itemized Deductions. You must meet two thresholds before any possible savings can kick in.

  1. Total itemized deductions must exceed the standard deduction
    1. Individual: $12,400
    2. Married: $24,800
    3. Head of Household: $18,650
  2. Medical and dental expenses must exceed 7.5% of your Adjusted Gross Income (AGI)


Unfortunately, most people cannot get a tax break by paying your dental insurance premiums using resources held in a Health Savings Account (HSA). However, it could be possible to spend the funds if you lose your job.[1]

  • Continuing coverage under COBRA
  • While receiving unemployment compensation

In conclusion, possible income tax reductions combined with better wellness and discounts from participating providers can make dental insurance a worth the price – despite the fact it covers so little.

Footnoted Sources:

[1] IRS Publication 969