Understanding the Various Types of Health Insurance (Part 2)

Medical and hospitalisation expenses are costly. Even worse, these expenses become even more costly every year due to healthcare inflation. That’s bad considering healthcare inflation rises at an even faster rate than Singapore’s national rate of inflation.

That’s why having the right amount of health insurance coverage is so important.


Isn’t MediShield or My Company’s Insurance Coverage Enough to Protect You?

That’s a question that every Singaporean should be working to answer! But the answer is different for everyone – MediShield, a company’s insurance plan or a combination of both might be enough. But the only way to ensure you’ll have 100% adequate coverage is to have additional health insurance coverage.

When it comes to health insurance, many Singaporeans use the following two responses to justify why they don’t need additional coverage in the first place:

  • “I already have MediShield, so I don’t need any more coverage”.
  • “My company already provides me with a good health insurance plan”.

Unfortunately, all it takes is one major medical emergency to make you wish you had purchased additional health insurance coverage in the first place. So before you accept that your MediShield or company’s insurance plan is enough, think about the following questions:

  • If you change jobs, will your next company’s health insurance plan be better or worse?
  • Up to what age will your company’s health insurance cover you?
  • What coverage terms and limitations are there in your company’s health insurance policy?
  • What hospitals do you prefer to seek treatment at? Which wards?
  • Do you have or want specialist/surgical coverage?
  • Do you want to only use Medisave to fund your medical and hospitalisation costs?
  • Do you want to pay a premium for having the most comprehensive medical coverage possible?
  • Would you rather pay high premiums for more coverage or lower premiums with the possibility of paying more out-of-pocket cash?

These are all questions you must ask yourself (and your financial planner/insurance agent) before deciding whether or not you have enough health insurance coverage.


What Are the Types of Health Insurance Available?

Additional health insurance coverage can come in many forms, covering many different types of medical emergencies that can occur any time during your lifetime. Going over your current coverage to find instances where there are insurance gaps or overlaps in coverage with a financial planner/insurance agent is recommended before choosing additional health insurance coverage.

When it comes to purchasing additional health insurance, there are two ways to pay your premiums:

  • Single Premium Policy: You can purchase a “single premium policy” where you pay a lump sum premium at the start of the policy.
  • Regular Premium Policy: You can purchase a “regular premium policy” where you make regular payments for the life of your policy.

Of course, one major reason why many Singaporeans are reluctant to purchase health insurance is the cost of premiums, which many cases aren’t guaranteed by the insurer and can change at any time. However, like many other insurance policies, if the premiums become too high you can always compare insurers and switch to policy that fits your needs and budget.

As for the types of health insurance available, here are the most common:


Critical Illness Insurance

Critical illness insurance is a type of insurance that provides you with a lump sum cash payment in the event you are diagnosed with a critical illness or undergo a type of surgery listed in the policy. Critical illness insurance can be purchased on its own or can come as a rider or packed in your life insurance policy.

The number of different types of critical illnesses covered by insurers varies, but typically includes the following:

  • Major Cancers
  • Coma
  • Kidney Failure
  • Heart Attack
  • Stroke

However, do keep in mind that insurers will also have a list of criteria defining whether a certain diagnosis qualifies for coverage or not. So make sure you’re very clear about the policy’s terms and conditions before making a decision.

Also keep in mind certain critical illnesses might have waiting periods (varies by insurer). That means that if you get surgery for your illness during the waiting period, the insurer will not issue a lump sum payout.


Disability Income Insurance

Disability income insurance is a type of insurance that provides you with a specified monthly payment every month as “income replacement” in the event you become disabled due to illness or injury and are unable to work. That way, in case you’re unable to work for several months, a year or longer – you’ll at least have a decent measure of financial security to survive.

While the amount you receive each month varies, it’s possible for a disability income insurance policy to pay up to 80% of your gross monthly salary.

Here are a few other factors you should know about before choosing a disability income insurance policy:

  • Deferred Period: Depending on the policy, there might be a deferred period where you won’t receive benefits unless you’re still disabled after that period. However, once you receive the income replacement payments, it’s possible to be paid until the age of 65 (varies by insurer).
  • Payments Stop/Reduce When You Work Again: Once you’re able enough to start working, you can expect your income replacement benefits to be reduced according to how much you have “recovered” from your disability according to medical check-ups.
  • Know How Disability is Defined: You’ll need to know exactly how your insurer defines the term “disability”. Some insurers might define disability as not being about to perform the duties required by your profession, while others might define it as being unable to work any job. So make sure you find out!


Hospital Cash Insurance

Hospital cash insurance is a type of insurance that provides a fixed sum of money daily for every day that you’re hospitalised. It’s meant to be an additional form of financial support that’ll help you deal with “lost income” due to hospitalisation, which is especially important for self-employed or variable-income earners.

The total payout amount you can receive varies by insurer. However, the amount you receive can end up being less than your medical expenses, so choose wisely.

Here are a few other factors you should know about before choosing a hospital cash insurance policy:

  • Waiting Period: Many insurers have a waiting period, meaning you’ll only receive your daily fixed sum of money after you have been hospitalised for certain period of time.
  • Can Only Claim a Limited Amount of Days: Daily fixed sum payouts can only be made for a stipulated number of days per year or per policy – with the policy terminating once the lifetime number of days has been reached.


Long Term Care Insurance

Long term care insurance is a type of insurance that provides a fixed monthly sum of money that goes towards your caretaking and nursing needs. This is a type of insurance that’s geared towards making life easier during your golden years in the event that you develop a disability that leaves you unable to perform important daily activities.

These activities include:

  • Dressing
  • Bathing
  • Daily Mobility
  • Using the Restroom
  • Eating
  • Transferring

One form of long term care insurance you might be familiar with is ElderShield, which is available to Singapore Citizens (SCs) and Permanent Residents (PRs) who are contributing members to the Central Provident Fund (CPF) when the turn 40. You’ll be assigned an insurer that will offer auto-coverage packages to you about 90 days before your 40th birthday.

ElderShield offers “optional” coverage as well, known as ElderShield supplements for an additional premium. These supplements offer better disability coverage at different price ranges and can be paid using your Medisave or cash.


Medical Expense Insurance

Medical expense insurance is a type of insurance that will provide payment for medical expenses resulting from illness or injury. Typically, you’ll receive payment for expenses derived from the following:

  • Surgery
  • X-rays
  • Lab Tests
  • Specialist Consultations
  • In-patient Medical Treatment

However, keep in mind that medical expense insurance does have its limits and won’t offer “comprehensive” coverage.

Here are a few things to keep in mind about your medical expense insurance policy:

  • Not Fully Comprehensive: The policy might not cover ALL of your medical expenses.
  • Limits Apply: There may be lifetime or policy limits for how much expenses you can claim for each illness or injury.
  • Pre-existing Conditions: Your pre-existing conditions may not be covered under the policy.
  • Medical Tests: Your medical tests certain illness or medical conditions such as biopsies may not be covered under the policy.
  • Waiting Period: There may be a waiting period where expenses will not be paid until after the period ends.
  • Co-Insurance and Deductible: Your co-insurance and deductible can help keep your policy premiums affordable, but the bad thing is that it also means you’ll have to pay more out-of-pocket for your medical expenses.

MediShield is the best example of a medical expense insurance policy.