Medical Insurance: Minor Differences Make Major Impact!

Are all medical insurance policies the same? Do small differences equal to no difference? Actually, in a medical insurance, minor differences can have major impact!

Nowadays medical insurance has become the most important insurance product regardless if you are rich or poor! The poor are afraid that they are unable to pay the expensive medical bill while the rich seek to preserve their wealth and transfer their financial risk to an insurance company.

Table of Contents

Health insurance: Peace of mind

When one decides to buy medical insurance policy, what is the first product that comes into mind? A Medical Card! Who would have thought that one day, a medical insurance card would include a total of 36 critical illnesses!
Based on the products available in the market now, a good medical coverage should comprise of:

Medical Card (technically it’s called Health Insurance)
36 critical illnesses coverage
Early CI
CI waiver

Usual doubts in insurance

Other than the product benefit, how many consumers have ever thought of the questions below?

I bought my insurance while I was very healthy. Will my insurance company refused my hospitalization claims?
Will the premium increase after making a claim?
If the insurance company stops underwriting a policy, can I still renew my insurance?

It used to be that most people buy insurance from their friends and relatives who are agents, so they never thought of making a comparison. However, nowadays, consumers are more educated and they like to compare products. It’s quite the norm that the last agent to meet the client wins the bid to sell a policy, because by then he will probably know what the customer is looking for. During comparisons, be careful, so as to not end up understanding that “minor differences make no difference”.

It’s important to know the definition of a benefit and the terms and conditions written in the policy. There will always be differences between one policy and another, in terms of making claims and a continuation or policy renewal. Therefore, as mentioned earlier, small differences may actually have a major impact.

Let’s see the small differences of medical cards that may affect policy renewal. For 15 years of policy checkup, I have analyzed almost 2000 policies from various insurance companies and have managed to classify medical cards into three major categories:

Non-guaranteed renewable policy
Conditional renewable policy subject to portfolio withdrawal
Non-cancelable policy

Normally, they would not appear in the benefit table of a sales illustration and most of the time, no inquiries are made about them. Even if they did appear, it’s likely you may not understand the meaning and their impact on your policy. Why is it so important to know the definition of each of the above?

Case Study: 01

Say Mr. A is healthy when he bought a policy. On the 2nd year, he is diagnosed with high blood pressure. Later, he is admitted to the hospital due to a heart attack and it was concluded that his heart attack was due to high blood pressure. Can Mr. A make a claim?

Case Study: 02

In regards to the above case or any case which is similar, after hospitalization claims due to for example, a heart attack, will the premium increase?

Case Study: 03

Whether or not a claim has been made or the policy owner is healthy, if the insurance company decides to discontinue medical insurance business due to losses, can a policy still be renewed?

The answer for the above mentioned questions would depend on the three different types of terms and conditions

Answer is in the table below:

Case Study: 04

When a father buys a medical insurance for his child, the father will be the policy owner and the child will be the life assured. If the father passes away before the child reaches the majority age (define by each of the insurance company respectively, there is no fixed age), his ownership of the policy remains. This means, during this period of time, if the child is admitted to the hospital, the insurance company will pay the pre and post hospitalization claim by issuing a cheque to the deceased father! – The child will not be able to withdraw the money!

For a situation like this, the only way is to go through a legal process. With a will, a probate will be granted. The surviving parent or legal guardian has to show it to the insurance company in order to change the policy owner. Without a will, a letter of Administration will be required. This will take some time to process. If this policy is not mentioned in the will, or the administrator overlooked this policy and did not include it into the application of letter of Administration, the cheque will be kept until the child reaches his or her majority age. Then only can he or she ask the insurance company to transfer the ownership of the policy and reissue the cheque. Without experience hardly anyone foresees this issue! Therefore, to avoid this, a company that offers a contingent owner for children policy would be a better choice!

The above are some of the example how small differences can have major impact. However, these are the small differences that are always overlooked in policies.

Michelle Teo Gek Lan

CFP, RFP
Independent Financial Adviser’s Representative (BNM)
Financial Planner’s Representative (SC)
Tel: 03-7983 9985
Email: advice@axcelink.com.my
Website: www.axcelink.com

Michelle Teo is the Co-Founder and Executive Director of Axcelink Wealth Advisory Sdn. Bhd. She has 23 years of vast experience in the financial service industry. She has developed extensive expertise and strategies in financial planning, especially insurance policies check-up and analysis. Particularly, she has the most comprehensive, thorough knowledge and strong expertise in the context of Malaysia’s Medical Insurance field. To date, she has analysed almost 2000 policies from various Medical Insurance provider companies. She has committed to consistently analyse and study the most beneficial insurance policies packages, in order to customise personal medical insurance for her customers.

She provides talks to the public, universities, public listed companies, investment club and association for the purpose of creating public awareness of the importance of financial planning. She was a columnist for Money Compass, and was also featured in various publications such as Nanyang Siang Pau, Oriental Daily, MFPC Financial 1st, Smart Investor, Personal Money, Family Circle, Baby Talk, Natural Health, Smart Kids (E,C,M),A Healthy Lifestyle, Focus Malaysia and etc.

Disclaimer: All information and examples mentioned in this article were based from real-life experiences of different people. The author is not responsible to any individual for any losses, injuries, damages, claims, liabilities, fees, costs, and expenses (including legal fees) arising out of any action taken against the staff or the doctor of a private hospital/specialist centre as a result either directly or indirectly use of the information provided by the author. The author shall defend, hold harmless against all loss, damage, claims, liabilities, fees, costs, and expenses (including legal fees) arising out of any action taken by the staff or the doctor of a private hospital/specialist centre to defend in a lawsuit by the user of this information, including any acts or omissions of the author. Further, the contents of this article is a brief and simple illustration collated solely for public awareness regarding the long term Medical Planning to keep the premium at an affordable level, and is not in any way intended for Medical Planning purposes. Anyone who would like to do a Medical Planning is greatly encouraged to seek the advice of a qualified and independent financial adviser specializing in Medical Planning. Lastly, the author shall not be held liable for anyone who uses the information to do their own Medical Planning.