You may be young and healthy now but you could be diagnosed with a serious illness tomorrow. What then? Perhaps you've planned and saved well for your retirement and children's education, but in one clean sweep the money disappears. Treating serious medical ailments burns holes in our savings- thus the need for medical insurance is the only way to deal with huge medical bills."Even if you have a general understanding of terms, they could be defined differently under different contacts"
Differentiating policies
Health-related insurance covers a variety of policies. A critical illness cover pays you a lump sum when you are diagnosed with any of the stated dreaded diseases. Disability income plans usually provide you with an income in the event that you are incapacitated.
A hospitalization benefit plan will entitle you to some cash for the duration of your stay in the hospital, aiming to deflect the extra costs that you incur while hospitalized. Personal accident plans have a certain measure of coverage for hospital bills relating to your accident, while long-term care plans may include an allowance if you require prolonged care out of the hospital.
However, if it's dealing with hospital bills its hospitalization and surgical (H&S) plan that you require. The H&S, as evidenced by its name, takes care of the costs of hospitalization and surgery.
When choosing an insurer, remember that there is no point in being insured for a large sum when you have to fork out cash first and you don't have the money.
What to do when buying a policy
Always make sure you read and understand the terms of a policy you purchase. Even if you do go through it, weaving through the various terms and attempting to compare benefits between policies can be difficult. Even if you have a general understanding of terms, they could be defined differently under different contacts.
To aid policyholders better, Health Insurance has directed a move towards standardization of terms used in policies. The life insurance and general insurance associations of Malaysia, LIAM and PIAM are drawing up a common underwriting guide, which will have common definition of contract wording and minimum standards, especially for terms like pre-existing illnesses, co-insurance and excess. Although some say that this will hinder free competition, standardization will reduce confusion among policyholders.
It is important for you to know what kind of policy you need or else it could fail to support you when you need it the most. It is recommended that an individual obtain 3 kinds of medical insurance:
a. hospitalization and surgical (H&S), which covers reimbursement for medical expenses
b. critical illness plan which provides a lump sum for replacement of lost income
c. disability income benefit for the duration of disability or until the age of 65 or 70
The amount of insurance taken into consideration should not just be for room and board, but benefit amount for items such as surgical expenses, in-hospital expenses, and pre-hospitalization diagnosis, post-hospitalization treatment, major organ transplant, outpatient cancer treatment and outpatient kidney treatment. Every insurer may issue the same room and board amount, but have totally different amounts for all the other items.
On top of that, you would need to look out for areas such as:
- definitions and limitations to payment of benefits
- how a disability define
- how soon after a claim can one claim again
- special provisions (succeeding policy holder after the first policyholder dies to avoid the hassle of declaring their health again)
- does the policy have guaranteed renewability- to ensure protection is available throughout and premiums are maintain despite recent diagnosis of illness
What if you are already covered?
These days, many companies cover their employees under group medical insurance. Does this mean that you don't need a separate policy for yourself?
Note that one cannot make double claims with H&S policies- so make sure that your needs are covered. If it isn't, you can claim the balance from your other policy, depending on how the multiple insurers work things out.
Find out the cover provided by your employers and then you can proceed to top up the difference to improve your coverage. If the cover is sufficient, then there should be no reason to add on.
Depending on your own needs and wants, you may want to take on your own policy with a higher limit of benefits. (e.g. instead of a shared hospital room, you may choose to have a private room).
However, if you rely on your employer for your medical insurance needs, you will have to know that once you leave your place of employment, the coverage ceases. Therefore, you will need to make provisions before leaving the company by picking up a policy a year before you retiring or resigning as most policies have a one-year waiting period for certain illnesses.
Generally, it is wrong to think that picking up a policy later will cost you more. Generally the premiums you pay are related to the age band you fall into (e.g. 21-25 years, 26-30 years) and will increase as you grow older although rates for children can be higher than young adults. The premiums you pay will increase as you enter the age band, regardless whether you are renewing a policy or picking up a new one.
The definite good thing about picking up a policy when you are younger is that you are usually healthier. Age is a barrier, with most insurers limiting entry age at 60, with renewals up to 70 years. Once you are diagnosed with an illness or deemed high-risk, you may no longer be insurable. Most policies do not cover pre-existing conditions, or if there is a waiting period before they are covered. If the insurer does accept you, there may be exclusions and in some cases, pay more in terms of a load.
Making your decision
The only way of to keep healthcare costs down for the average person is preventive care by having regular medical check-ups and taking the proper medication early on.
Concerns rise as healthcare costs increase day by day. Better technology and new equipment and techniques translate into higher costs. Drug companies, seeking to recoup their high research and investment costs as well as make some profit for their shareholders, price their drugs accordingly.
Whether you are male or female, an athlete, white-collar worker or millionaire, healthcare is something we need to think about. Ensuring sufficient funds for medical costs is an essential part of financial planning.
