Never too early to get health insurance

SINGAPORE - Serious and persistent illness can wreak havoc on one's finances.

Health insurance, an efficient way to mitigate that financial risk, is one aspect of risk management that should not be put off for too long.

Here are some principles to take note of about health cover:

Group cover cannot replace individual portable cover

While you are employed, it is tempting to put off thinking about buying your own health policies. Some companies offer generous group hospital and surgical (H&S) cover. The catch is that should you be out of work or retire, that cover ceases. At that point, the cost of buying personal health cover may be very high, given that you are likely to be older and you may have pre-existing conditions that may be excluded.

Unfortunately, there will inevitably be some degree of replication between a personal H&S policy and group cover. Premium payments, however, need not be too much of a strain. For instance, premiums for MediShield Basic and private integrated Shield plans are paid through the Medisave account under the CPF.

The younger you are, the lower the cost of cover

This is because young people are likely to be healthy and the probability of their making a claim is small. That is why you are often advised to buy insurance when you are young. This is particularly because, as they get older, many people will develop health problems which are likely to be excluded or subject to a premium loading.

Be honest about pre-existing conditions

Underwriting for health cover is typically through a declaration. Critical-illness plans may require a medical examination. It is important to be honest in declaring one's pre-existing conditions. Failure to do so could cause the insurer to deny your claim or even to terminate the policy.

When in doubt, declare all health information required. Information that seems innocuous to you, or a condition that your doctor did not ask you to follow up immediately, may be pertinent information to an insurer's underwriting decision. You should discuss with the insurer and negotiate the extent of coverage for pre-existing conditions.

Deductibles and co-insurance

The healthcare framework under the CPF and the Health Ministry is one that seeks to keep premiums low and encourage a sense of responsibility over one's own health. Hence H&S schemes under the CPF umbrella are structured with a "deductible" layer - that is, with a first layer of costs that the policyholder has to bear.

There is also a co-insurance which is the percentage of the bill you have to pay.

Read the fine print

Read the policy documents and make sure you understand the circumstances under which you can or cannot make a claim. Be aware, for instance, of whether the plan is guaranteed renewable, or the premiums are guaranteed to stay level.

On long-term plans, such as Shield H&S plans, the premiums are typically quoted based on age bands. MediShield and integrated Shield premiums may be adjusted upwards but, when this happens, it will be applied for all policyholders. This means the insurer will not discriminate against any single policyholder, or exclude anyone because of a claim made the previous year.

Note exclusions and waiting periods

For disability cover, for example, exclusions may apply for reasons ranging from self-inflicted injury, to active participation in crime or terrorism, as well as Aids.

Affordability

If you are choosing a plan, make sure to peruse the premium schedule to ascertain the affordability of the plan. It sounds ideal to have almost all health risks covered, but there are also limits on one's financial resources. At older ages, the premiums may escalate significantly and become unaffordable.

Review your needs and expectations of the level of care

If premiums are a challenge at older ages, you may have to be prepared to re-think your expectations and consider downgrading the cover to a lower class ward, for instance.

Don't over-purchase

It may sound comforting to have bought a lot of insurance, but you should consider how well your health plans match your actual needs. For instance, it is fairly easy to buy hospital cash cover where premiums may seem affordable. But the hospital cash benefit actually bears little relation to your bill. If you have limited resources, it may make sense to save the cash for a more comprehensive H&S plan.

This applies to critical-illness plans as well. You are likely to need some CI cover, which pays a lump sum upon diagnosis of a majo illness. But be wary of purchasing too much. There is always a risk that the illness you may have later may not meet the strict definitions of a typical CI policy.


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