Getting a Medical Insurance Plan – What You Should Know

Insurance is a big topic – for this post, I am just focusing on medical insurance cover in Malaysia. I am definitely not an expert on insurance, and personally, this is not my most favourite topic in the world. But it is an important topic. I really struggled to find good information on the internet when I was deciding on what policy to take recently. I noticed some blogs can be biased and pushing products from certain companies. Anyway – I thought it’s good to share some information that I have gathered recently for my own personal use – could be useful to others. Of course – your situation and needs are different than mine. Plus there are new products in the market all the time…But if it helps…

Do You Need Medical Insurance Cover?

Government Hospital

In Malaysia, we have the option of government hospitals which guarantees medical treatment at affordable costs (almost free in certain cases). Several of these hospitals I should say is really top-notch and even better than some big reputable private hospitals. The problem with government hospitals are the long queues (although the same can be said by a few of the big private hospitals). 

Having said all that – I have also had personal experiences with the not so great government hospitals. In my case, it was not the doctors – but the nursing support that was frustrating and made my family and I felt harassed even. You know when people care about their job and when they don’t. Especially when patients contract something else, due to consistent lack of care. That is a long painful story and it relates to my Dad. Palm-sized bedsore after two weeks, and by fourth-week needing surgery – yeap something is up isn’t it? He also contracted something else from the hospital that we ended up fixing in a private hospital. Basically, he was admitted in the hospital for something else – but ended up in two hospitals for two months treatment for something else for the most part. The bill from the private hospital was very high since my Dad didn’t have any insurance. It wiped out almost all my savings even after taking all the amounts that I can access from EPF (government compulsory pension scheme). And I was taking a short break from work so no income either. Super stress situation at the time – but anything for my Dad. You only have one Dad, you know.  

Private hospital

Like I was saying, we have several excellent government hospitals with the best specialists in the country. But if possible – you would want just AN OPTION to get treatment from a private hospital for various reasons. 

With the escalating medical costs annually though, you need to ensure you personally have a good medical card or at least have a cover from your employer. A personal medical card typically covers, amongst others, hospitalisation (including pre/post-hospitalisation), surgical cost, and outpatient treatment for any certified illness.

What if you have company cover?

If you do have a good cover from your company, the question people ask themselves are – ‘do I still need to bother with getting a card?’. I would recommend getting a card still, especially if you are already in your mid-30s to late 30s – due to reasons described below, which some are very relevant to my own situation and a few others I know. (But it also has to be the right insurance package to make sure it makes sense).

  • There is no guarantee that you will stay forever in the company
  • If you jump companies, you may find that some companies coverage may be quite limited.
  • If you are working in the private sector especially – the medical benefits policy can change – your cover today may be different at a later point
  • If you are dependent on your spouse’s medical cover – if your spouse leaves his or her company, then you are again at risk
  • Because you are still healthy – (insurance companies will not cover for things you have been diagnosed with)

Note that there are different types of medical cards out there – so, you need to get the right one depending on your situation.

Affordability

Taking on an insurance policy is a long term commitment. Be sure you can afford the premium for the term signed.

I didn’t take any cover for medical separately when I was younger as I was covered under my company scheme anyway. But I always had a life and critical illness cover since I started working. That was a conscious choice as I couldn’t afford to take so many covers. But I am in my 40s now – and after leaving my company recently, I realised that perhaps I left it far too long – now my premium is quite high. I need to make sure I have a good medical cover if anything should happen.

Investment Linked Plan (ILP) vs Non-Investment Linked Plan (Non-ILP)

There are two types of medical cover – ILP vs Non-ILP. Under non-ILP, you have two options – pure standalone medical cards or medical rider on a basic life plan (with no investment income). The general characteristics of the two products:

ILP Medical Cover (Rider)

Pros

  • Fixed premiums for the term covered
  • Cover is up to 100 years
  • Accumulates savings if the investment portfolio does well
  • As it is a rider on a basis life insurance, it comes with the life cover lump sum payments in the case of death/permanent disability

Cons

  • If you cancel your basic insurance, than the rider is also cancelled = no medical cover
  • May need to top up if there is shortfall in accumulated funds to provide sufficient cover

Non-ILP Medical Cover

Pros

  • Low premiums in the early years (tiered pricing) for pure standalone medical cards; flat premiums for non-ILP medical riders 
  • Guaranteed annual renewal for standalone medical plan (for a few insurers only); guaranteed renewal for non-ILP riders
  • The non-ILP rider also comes with a small lump sum payment in the case of death/permanent disability 

Cons

  • Premium changes with age or other risk factors for pure standalone medical plans
  • Cover is up to 70, or 100 years (I have seen some policies with 80-85)
  • Annual renewal for pure standalone medical plans
  • Non-guaranteed renewal for pure standalone medical plans (for some companies)

So What Should You Choose?

Whichever product you choose  (or can choose) depends on your situation, and what is it that you really want. You may notice as you read this section, that I am skewed towards a non-investment linked medical plan. That is what I opted for in the end after researching what works for me. I did, however – complimented the medical plan with separate life and critical illness cover – I will explain more. 

Investment-linked Option - What You Should Know

Medical costs go up significantly year on year. Taking an ILP, means not all of your premium goes to your ‘medical funds’. The extra money that you pay as a premium with ILP from the very beginning is being invested, and the returns from there are used to ensure your premium stays flat – covering any shortfall that you would have had to pay as medical costs continue to increase if any. 

The risk with ILP is in the later years. When you are closer to 60 perhaps, (basically when you are close to your critical years), there is a risk that whatever balance you have in your funds may not be sufficient and you would need to actually top-up. A few agents were trying to convince me that this hardly happens because the returns on investment have always been good – but no one can guarantee you a 100%. However – the good news is – recognising that the risk to the policyholders in the market from various cases, Bank Negara recently enforced some restrictions on minimum % of the premium to be retained (not invested). Policyholders also will now get an annual statement stating their cash value vs how long that value will be able to cover their future medical needs. Previously – you would have to take the initiative and check with the insurer periodically.

Non-ILP Options - Key Things To Note

There are two types of non-investment linked medical plans.

The tiered pricing plan – where medical premium increases with age – this makes sense because of rising medical costs. So you pay a lower premium now and pay higher later. But you know what you are getting – it’s all very transparent. With the ILP, you also run the risks of having to top up. Unless of course, you have more than sufficient money in the funds to cover. Ask your agent for the breakdown of your annual premium – and how much really contributes to your medical cover especially in your early years, and what you can expect in the laters years under multiple scenarios. He/she would have a schedule that shows how this works.

There is also another type of non-ILP – where the premium stays flat, but the costs are spread from the first premium, so the costs of this kind of card are quite high from Day 1. This may be tight for most people – but it is an alternative, (especially if you take it when you are a bit older like me and hopefully by that time will be able to afford it). To lower my monthly premium, I chose a plan with deductibles – meaning I bear some of the costs and the insurance company bears the rest. 

Just to be clear, no agent will give you a guarantee that you will never need to top up under any scheme – ILP or non-ILP. But there is less risk of having to top-up your premium of course, with non-ILP products. 

Additional Considerations

  • Insurance Is Not An Investment

This is very important. People are skewed towards ILP products because of lower premiums and the potential growth in values of the funds. Personally I don’t believe treating insurance as an investment. You take insurance because you want to ensure that if something happens, you don’t have to worry about paying the hospital bills or in the case of critical illness cover for example – you get lump sum payment to help support you for treatment or loss of employment etc. So you should not expect to gain so much from it.

So in case you want to go for ILP, when your agent shares with you your expected cash value at the end of the cover period etc., do understand the interest rate assumption behind the numbers and assess whether realistic. There are usually two scenarios presented – the best and worst case. The real situation is likely to be between the two. At least you clearly understand what you are about to sign up on. Also, ensure you monitor the annual statement of your cash value vs cover requirement that you should now be getting moving forward with the new BNM policy.

Personally – I believe you can do your own investment with the difference in premiums between ILP and standalone plans elsewhere and get decent returns. You have more flexibility there to manage your finances but you should, of course, save to cover for the future commitment including changes in your insurance commitments. This takes discipline.

  • Renewal

This is very important. With an ILP, of course, your cover is automatically renewed as it is a rider. So you don’t have to worry about getting sick and the insurance company not renewing it.

Standalone medical plan usually needs to be renewed annually. Some insurers like AIA and Prudential will have a guaranteed renewal policy which is great. But if you go for the tiered pricing premium that increases with age, like the one AIA offers, the renewal is guaranteed but the premium may be increased to reflect any changes in your medical condition before the next renewal date. So be aware of the risk there.

  • Annual Claim Limits

Most insurers will have no lifetime limits these days. But the annual limit is usually capped depending on the plan you choose. The higher the annual limit, of course, the higher the premium. You should do a comparison between all the medical plans to assess what makes sense to you. 

I have seen ILPs with no annual limits. But the thing about insurance companies is that they make their profit and premium calculations based on the probability of people getting sick and making actual claims. The annual limit capping allows them to control their exposure on payout on policies. So logically by setting ‘no limits’, the exposure is higher. More claims will probably result in re-pricing of premiums. But insurance is in a way a gamble, isn’t it? It’s all about the odds. So you don’t really know.

  • Is Standalone Medical Plan Sufficient?

It will cover you for the big bills from medical providers, but maybe you need more than that especially if you don’t have much savings, to begin with. Maybe you want to leave some money for your kids in case something happens to you. Or maybe you cannot work, or don’t want to work rather, for whatever reason, so – it would be good to get some lump-sum payments to cover for other things. This is where you should consider getting some life cover with critical illness rider. Also if you go for a standalone medical card say with $150k annual limit, if you get sick like my Dad did, then you just have a bit of buffer left for the remaining of the year. So complimenting your standalone medical plan with a critical illness cover then maybe the best solution.

In my next post on insurance, I will write about critical illness cover.

So life insurance, critical illness cover etc are also important but we are better off to keep the medical cover separate as per reasons mentioned before.

The Fine Prints

You will be asked to do a declaration of your state of health before signing on to a policy. This is a big deal – this is usually the reason why insurance companies do not honour your claims.

  • The insurance company will not cover any pre-existing conditions usually during the first 120 days upon the policy enforcements. Basically anything that you are diagnosed with during that period will not be covered. This is to protect the insurer if the policy holder under-declares certain things. Seems fair.
  • The medical plan will not cover pre-existing conditions prior to the effective date of the insurance – this one can be a bit tricky. I don’t know if I can call it fair but all insurance companies have the same policy. The insurance company assumes that you are aware of your pre-existing conditions as you would have received a diagnosis or treatment etc. I think that maybe this is reasonable for recent illness but I have heard of them going back as far as childhood years. Example if you had a leg injury when you were a kid, and you got better and all was good. But you were diagnosed with a medical condition in your much later years that can be, although not necessary 100% linked to that injury, (gray area), they may find a cause to dispute the claim. It doesn’t mean they will, but there may be a possibility. Which is why, people always say get your insurance set up while you’re young and healthy. Like I said – I don’t like this kind of clause and I personally feel regulators should look at this especially if the insurer start going back to that many years. Unfortunately, this is the kind of product that is in the market today.

Final Words

It all comes down to affordability at the end of the day. Not everyone can afford the best of plan. You need to find what works for you. I looked up a few standalone medical plans – and in the end I shortlisted AIA A-Life Med Regular and PruBSN Anugerah Plan. There are others of course – you need to approach different agents to get quotes and cover details. For ILP products, you have a number to choose from and I don’t really see major differences between each of them. So long as you go with the big insurers – it should be alright. Most important thing about ILP, is that you take charge in understanding your remaining cash value vs future medical cover needs to ensure that there is no shortfall.

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