Why Health Insurance?
Recently, the issue of retirement planning is a heatedly debated issue. I took this opportunity to re-visit some of my senior aged clients. I am surprised that some of them view medical insurance premium as a cost, and are unhappy that being older, or those with existing medical conditions, they need to pay higher premium. I think it is necessary to get re-educated on this issue by going back to the basic question: "Why Health Insurance?"
Medical cost in Singapore is one of the sure-way of depleting one’s assets. For example, it is not uncommon for a cancer treatment to cost $100,000. A colon cancer treatment alone can cost $6,500 to $7,000 (source: Parkway Group Healthcare Pte Ltd). These are direct medical cost.
The indirect medical cost are equally (if not more) damaging. On the one hand, our working capacity will drop; on the other hand, our need for special diet and transport will increase, not to mention if one need a care-giver. This drop in income and the rise in living cost is one of the main causes of financial problems. I have seen many such cases in my work.
In an unplanned situation, people self insure such risk, i.e. when illness strikes; they use their own savings or medisave. The few lucky ones will have family members to chip in. Such situation is not only unwise and also unsustainable.
In a planned situation, one transfers this risk to an insurance company. By pooling the premium from a large group of people, the insurance company will take on the obligation to pay the medical bill or provide the insured with a replacement income. To ensure the whole system is fair, the person with the higher chances of claim (i.e. older in age or with pre-existing condition), the premium is usually higher or sometimes, the policy is issued with certain exclusion.
The cost of insuring is high, but the cost of not insuring is even higher.
Medical cost in Singapore is one of the sure-way of depleting one’s assets. For example, it is not uncommon for a cancer treatment to cost $100,000. A colon cancer treatment alone can cost $6,500 to $7,000 (source: Parkway Group Healthcare Pte Ltd). These are direct medical cost.
The indirect medical cost are equally (if not more) damaging. On the one hand, our working capacity will drop; on the other hand, our need for special diet and transport will increase, not to mention if one need a care-giver. This drop in income and the rise in living cost is one of the main causes of financial problems. I have seen many such cases in my work.
In an unplanned situation, people self insure such risk, i.e. when illness strikes; they use their own savings or medisave. The few lucky ones will have family members to chip in. Such situation is not only unwise and also unsustainable.
In a planned situation, one transfers this risk to an insurance company. By pooling the premium from a large group of people, the insurance company will take on the obligation to pay the medical bill or provide the insured with a replacement income. To ensure the whole system is fair, the person with the higher chances of claim (i.e. older in age or with pre-existing condition), the premium is usually higher or sometimes, the policy is issued with certain exclusion.
The cost of insuring is high, but the cost of not insuring is even higher.
posted by Allen Lim @ 11:02 PM
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