Do you have Medical Insurance or Medical Protection?
Chan Carl 陈嘉安
Comprehensive Financial Planning | Sustainability and Diversity Advocate | Oxford
Critical illness may seem distant and unlikely. But if work stress and an unhealthy lifestyle are no strangers to you, just like any urban dweller, the risk might be higher than you think.
According to the Hong Kong Cancer Registry, 1 in 4 men and 1 in 5 women are at risk of contracting cancer before the age of 75. Cancer also accounts for approximately 3 deaths in Hong Kong.
Have you ever considered how a critical illness could change the little things in life and your financial footing? For example:
If your health is compromised, little things that make life matter, such as taking your kids to school, or playing your favorite sports with friends become a luxury
Health Insurance is an effective tool to manage the risk of a medical condition. However, a comprehensive protection solution, on the other hand, goes beyond just medical support. It has two key features:
A lot of people overlook or underestimate the impact of the cost of living when considering medical protections. Without careful planning, a serious medical condition can put a family’s entire well-being at risk and permanently change the life trajectory of many.
If you believe complete peace of mind and comprehensive protection are important, then this decision can help you visualize your decision-making process:
Your First Line of Defence - Medical Insurance tackles your medical bill
The rule of thumb is to focus your budget on managing risks that you can’t afford. For example, most of us can afford to go to the GP or specialist once or twice. Instead of spending on insurance that provides GP and specialist visits, medical plans that cover high-dollar items might be much more useful. That way, you are “using a fixed budget to manage uncertain risks” that might otherwise put you and your loved ones in undue financial hardship.
What if I already have a Corporate Medical Plan?
Corporate plans usually cover GP, specialist visits, and some level of hospital benefits. However, these plans are not designed to cover prolonged illnesses. This is where personal medical insurance comes into play by providing protection against serious medical conditions or accidents that result in a long recovery period.
It is a common myth that if you have corporate plans, you don’t need a personal medical plan. I will challenge that because:
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1. Corporate plans’ coverage on life-altering illnesses is very limited
2. Corporate plans don’t follow you when you switch jobs or lose your job
3. Critical illnesses are extremely expensive to treat.
Therefore, these two types of insurance are actually complementary to each other. Customizing your personal insurance based on the gaps in your corporate plan allows you to gain full protection against illnesses and accidents, big or small. That way you can have peace of mind to focus on fighting for things that matter to you.
Your Second Line of Defence - Critical Illness Income provides much-needed income when you are under treatment
Critical illness protection, on the other hand, is not medical reimbursement. It pays a lump sum of cash when you are diagnosed with a qualified condition. You get to spend the money however you want, usually to cover living expenses. No questions asked.
Do you have a mortgage to pay off? Are you a breadwinner or have a family to feed? If so, critical illness protection becomes extremely important to you - it fills your shoes as financial support during your recovery so that you and your family can stay afloat.
A study conducted by the Hong Kong Cancer Fund found that 72% of cancer patients in Hong Kong experience financial difficulties as a result of their treatment.
In fact, a client in his mid-40s with a wife and a young son got diagnosed with cancer. If it was not for the medical insurance that covered his medical costs and the critical illness plan that provided much-needed income during his treatment, his wife would have been forced to work again and would have had to borrow money from relatives for medical costs and to keep the family afloat.
DO NOT use Critical Illness Insurance to cover medical expenses
Medical insurance has a much bigger scope of coverage while critical illness insurance covers…critical illness only.
Also as important is the benefit ratio (coverage divided by premiums paid) from a medical plan is much higher than that of a critical illness plan. In Hong Kong, versatile medical insurance for a 30-year-old male can cost $4,000 to $13,000 HKD a year depending on deducible and add-on coverages. That covers $500,000 to $10,000,000 HKD a year, with a benefit ratio easily exceeding 100x. However, for critical illness, it ranges from ~$3,000 HKD for a term plan to ~$30,000 HKD for a whole-life plan with a $1,000,000 benefit. The leverage, as you can see, is much lower.
Make sure you prioritize your budget for medical insurance first before critical illness, or else you risk overpaying for your coverage, or in the worst case, not getting enough coverage to cover your medical expense.
We need Medical Protection, not Medical Insurance
Medical and critical illness insurance are good building blocks of a comprehensive medical protection plan. However, individual insurance products might not be able to address all your risks and needs. Therefore, it is extremely important to have a plan customized to your unique circumstances.
If you find this article useful or wish to try a customer-centric consultation session with solutions clearly and only mapped to your needs, Feel free to schedule a consultation session with me at?https://calendly.com/chancarl/30min?or drop me an email at?[email protected].
Always stay healthy and be well. See you next time!