Which Kind of Health Insurance Policies Are Necessary?
A Sense for Money
Indonesian consumers consistently cite health and education as their two top financial issues. Thus, today we will look at how a health insurance policy can help your peace of mind.
If you are one of the many people who think that there is no need for health insurance, then get real and think again! We are all at risk of suddenly becoming ill or having an accident. At the moment you may be healthy, earn a good income, and be confident that you won’t have any big health bills. But health problems can hit any of us out of the blue, whether resulting from an accident or sudden onset of an illness. Such problems can lead to huge costs and may potentially impact on your ability to work and earn a good income. The big risk if you become seriously ill is that your costs increase just at the time that your income falls. It is for this reason that many advisors say that health insurance is even more important than life insurance.
It is much better to take out a health insurance policy — even when you are still fit and healthy — since insurers will be keen to give you cover and premiums are very reasonable. If you wait until you are old or sick before applying for the health policy then it might be too late — the insurer will understandably be less keen to insure you. They may charge you an extra premium: Exclude costs or treatments relating to your current ailments — some even reject your application entirely.
Now there are many different types of health insurance and we will highlight three of the most sought ones: Medical reimbursement, critical illness, and hospital cash.
A medical reimbursement policy is designed to cover the costs of any medical treatment you need. Note that the word “need” is used since elective procedures such as cosmetic surgery are normally excluded. There will often be co-pays and limits. A co-pay is where you pay a portion of each claim (around 20 percent), while a limit is where there is a maximum limit for claims for treatment (such as no more than 500 dollars for dental treatment in any year). With some policies the patient needs to pay the medical provider first and then apply to the reinsurer for reimbursement, while with other policies the insurer settles directly with the medical providers. The latter can be a far more convenient option for the patient, as it avoids up front out of pocket payments although there might still be a chance that the insurer will deny claims which are not covered by the policy.
A critical illness policy pays out a fixed sum (say a billion Rupiah) in the event of the diagnosis of certain specified diseases (e.g. cancer, stroke, and heart attack). This sort of policy is designed to give a lump sum to someone who may wish to stop working or pay off a mortgage on the onset of a disease. The lump sum can of course also be used to pay medical bills, but there is no link between fixed sum and the medical costs.
A hospital cash plan is designed to pay a fixed daily amount for each day that you are hospitalized. You choose the daily amount at the start of the policy. The higher the fixed daily amount, the higher the premium. This cash amount can be used to pay the hospital bills as well as replace income lost because you are not working. These policies are good for covering costs and income shortfall when you are hospitalized but don’t pay out if you are being treated at home or while recuperating at home.
These three descriptions should give you a good feel for the sort of cover that is on offer, although there are many other types of health policies. There are also hybrids of these three, and they are sometimes bundled in with other types of insurance such as life insurance, accident, travel, or savings.
Here are several important things to check on with all health policies:
- Is the premium fixed or does the insurer have a chance to increase the premium over time – as you get older or if the claims under this type of policy are worse than expected?
- Does the insurer have the right to cancel the policy, for example if you become sick and the claims experience is bad?
- How long does the policy go on for? Be careful that it does not give cover you while you are young only to stop when age starts to take its toll and things start to go wrong.
Then there are the limits and exclusions: Some policies will pay claims as high as a million dollars while others will limit claims to a few thousand dollars. Some exclude claims for medical treatment overseas or dental work while others cover them fully.
The key thing is to make sure you know what you are buying. The last thing you need when you are sick is the additional stress of learning that you’ve been paying premiums for years but the costs of your medical treatment are not covered.
Of course many of you will have a group medical scheme with your employer. Even then, you still need to think about what would happen if you were to lose your job, retire, need overseas treatments, or other countless unimaginable scenarios.
Last but certainly not the least, think about other members of your family besides the main breadwinner. Sadly, children, spouses, and parents can all become sick and this can have a major impact on family finances, either by increasing costs (e.g. medical costs, need for domestic help, etc.) or by reducing income from employment.
Peace of mind comes from knowing you have the right insurance cover while hoping and praying you and your family will never need it.
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