Thursday, May 28, 2009

STI: In hard times, take cover

May 24, 2009

small change

In hard times, take cover

The time to take up medical insurance is when you're still in good health

By Jason Ong 


A client called me recently requesting a review of her insurance policies. She wanted to ensure she is sufficiently covered with the right type of health insurance in case she loses her banking job. I went through her files and assured her that she and her family are adequately protected with the plans that we implemented last year.


We all know that if you are not covered and have an accident or develop a major illness, it can be financially devastating. The good news is that a comprehensive medical insurance plan can help defray most of the hefty hospitalisation expenses.


If comprehensive health insurance is so important, why then do so many people still fail to insure themselves adequately? In the course of my work, I find that many still have the following misconceptions that keep them from getting a comprehensive medical plan. If you believe in any of them, it's time to learn more about how a proper insurance portfolio can help protect you and your family.


Myth No. 1: My company pays for my medical bills so I don't have to worry about it


Truth: An employer-paid group medical insurance policy covers you only while you are on the job. In Singapore, most group medical plans are still not portable, and the maximum limit per policy year is usually low at between $30,000 and $80,000. There is also a maximum limit per lifetime, ranging from $90,000 to $250,000. It's worth noting that most group policies will be terminated once an employee retires or is above 65. Therefore, you should consider getting your own health insurance such as a private Medisave-approved integrated shield plan early, while still healthy. It's a big risk to delay the cover until you have retired as your health may deteriorate and make you uninsurable.


Take for example my client, Ms Chew (not her real name) who is in her 30s. She was a promising marketing manager with an American multinational company. Last year, however, she was diagnosed with renal failure. Regular renal dialysis hindered her work so she was forced to quit. In her case, she lost not only her income, but also the medical cover she relied on. To make matters worse, she is now uninsurable.


Myth No. 2: I have bought enough insurance


Truth: Many people buy a few life insurance policies and believe that they are well protected. They cannot be more wrong. Many still believe that buying whole life critical illness policies will be sufficient to cover hospitalisation expenses. However, it should be pointed out that different insurance plans are designed to cater to different protection needs.


The purpose of a critical illness plan is to cover the loss of income in the event that you are unable to work due to a critical illness. It will pay a lump sum if you are diagnosed with one of the 30 critical illnesses. Once you are awarded with a claim, the policy is typically terminated.


To cover hospital stay and surgical costs, you need to buy a private shield plan or a hospitalisation and surgical policy.


Myth No. 3: I already have Medisave and MediShield so I should be okay


Truth: Medisave is your own money, and not an insurance scheme. The current Medisave cap is $34,500. At the current rate of medical inflation, it's likely that any major surgery would wipe out one's Medisave balance if he or she just depends on Medisave to pay for the medical bills. Instead, Medisave should be used to pay for health insurance premiums.


MediShield, on the other hand, is a national catastrophic medical scheme that is intended to cover expenses at Class B2/C wards. With recent reform, MediShield is now paying out more for large Class B2/C bills. However, it's worth highlighting that the maximum coverage age for MediShield is 85. If you live beyond that, you will be on your own. In addition, MediShield will be insufficient if you are treated in private hospitals or Class A wards.


Myth No. 4: I am still young and healthy


Truth: This is by far the greatest myth of all. Do not take your good health for granted as you never know when you may fall ill. While the middle-aged group is more susceptible to medical conditions such as high blood pressure, diabetes, cancers and heart diseases, much has been written about young people being hit with severe health problems, causing great financial difficulties to the family.


Unlike investments, insurability is the reason you need to buy insurance early when you are young and healthy. You must get it before you need it, because if you don't have it when you need it, you may not get it any more.


Of late, I have been dealing with an increasing number of clients who are categorised as substandard or uninsurable. For instance, if your Body Mass Index (BMI = weight in kg � square of height in m) is above 30, at least one local insurer will not consider your application. Also, if you are below 35 and have a combination of high cholesterol and high blood pressure, your application may be denied.


Myth No. 5: I don't need to buy insurance for my children and stay-at-home spouse


Truth: This may help explain why many of the uninsured are housewives and children. Some may rely on their parent's or spouse's company group plan, which may be rendered useless in the event of divorce or death of the working parent or spouse.


In May last year, my 18-month-old daughter was admitted to Mount Alvernia Hospital for high fever and stomatitis. The bill for the one-day hospital stay came to $1,116. In more severe cases, the average costs for treating major illnesses such as colon cancer and leukaemia can be well over $100,000 and $400,000 respectively. Fortunately for me, my daughter is covered under a private shield plan.


In difficult times such as these, a good private shield plan is all the more important. In insurance planning, the worst time to plan is when a medical crisis happens.


The writer is an adviser of Professional Investment Advisory Services. The views expressed are his own.

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