1) Understand the benefits
The fact that there is no one ultimate plan that works for everyone means you need extensive research to acquire in-depth understanding before buying insurance of any kind. To arrive at the level where you become capable of explaining the advantages and disadvantages of every plan, you would have to understand the basic benefits in insurance policies. We have highlighted some which are of importance:
a. Annual limit: The total claimable amount by the insured per year.
b. Lifetime limit: The total claimable amount by the insured within the policy period.
c. Hospital room and board: The benefit limit for hospital stay. Upgrade of wardroom which results in exceeding the benefit limit is subject to terms and conditions listed in your contract.
d. Intensive care unit: The benefit limit for confinement in intensive care unit.
e. In-hospital/ inpatient & related services: This include fees incurred by costs not related accommodation and food, such as surgery, hospital supplies and services, anaesthesia, operating theatre and specialist consultation, when you are being admitted to hospital (spending at least a night at hospital).
f. Outpatient treatment: Outpatient treatment includes costs incurred when your treatment is done without staying in hospital, such as daycare procedures, kidney dialysis, diagnostic test and cancer treatment. Nevertheless, the list could go as long as it is stated under your contract.
2) Understand what fully-insured plans and cost-sharing plans mean
Having explained the benefits that commonly exist in your insurance policy, it could be surprising to tell you that the insurance company may not cover your entire medical expenses even though it is within the annual limit.
Your insurance payment scheme can be of one of the two types: fully insured plan and cost sharing plans. For fully insured plan, you will be insured against the full amount of your medical fees (subject to benefit limits) whereas in cost sharing plans you will be bound to pay a fixed or variable amount before the benefits comes into effect.
In particular, there are generally three types of cost-sharing plans:
There are some cost-sharing medical insurance schemes:
a. Annual deductible: A fixed amount paid by customer each year for all medical conditions before insurance companies begin to pay. For example, if your insurance policy is subject to an annual deductible of RM2000, you will be liable for your first RM2000 of the medical fees in a year.
b. Per-condition deductible: It works the same way as annual deductible, except that different medical condition may have different deductible amount. For example, a cancer treatment may have a per-condition deductible of RM4000 whereas a kidney dialysis may have a per-condition deductible of RM2000.
c. Copay or co-insurance: A fixed percentage paid by customer each time before insurance companies begin to pay. For example, in a 20% co-insurance policy you will have to pay 20% of your medical treatment while the other 80% will be covered by the insurance company.
Evidently, a cost-sharing plan demands a lower premium since you will be covering a portion of your future medical fees. It goes without saying that you could easily lower your premium by going for a cost-sharing plan. This should only be useful when you have enough cash to pay for the deductibles every time. Should you thus opt for a high-deductible or low-deductible plan?
To answer this, you should probably do a rough calculation of your medical expenses in the past year. If you are a frequent-visit patient, it might be better to go for a low-deductible and higher premium plan, or even a plan without any deductibles.
3) Understand the factors that can increase your premium
The next thing you would probably ask after understanding the coverage of the insurance policy is the premium you need to pay. Although we do not have the formula to calculate your premium, what we could probably help here is to provide you a broad picture of how the premium can be increased according to your condition.
We have listed the major factors that will increase your premium:
- You are not young
- High risks involved in your occupation
- Family disease
- Past medical history
- Pre-existing disease
- First time buyer
Still, there are some cases where your premium can be increased depending on your choice. For instance, Allianz offers cashless and non-cashless plan. With non-cashless plan, you pay the medical fees upfront before being refunded by Allianz. By doing so, your premium will decrease quite significantly (more than 20%). Conversely, you pay a higher premium for cashless plan which your upfront payment is not needed.
As you can see from the table above, even though your annual medical expenses fall within the annual limit, you will still face a limit on the number of days you are being insured (such as Hospital Daily Room & Board, Intensive Care Unit, Pre-hospitalization Treatment, Post-hospitalization Treatment and Home Nursing Care). Also, many of the benefits are subject to coinsurance or deductible. According to what we have explained above, the higher is your deductible or coinsurance, the lower is the premium you are obliged to pay.
This article follows our principle that is to help people make wiser financial decisions. We hope it can help prevent you from bottom-feeding for the cheapest insurance policy or simply rolling a dice and pray that you can get the best one. The best way out is always through. Therefore, learning it yourself is always better than being unreasonably ignorant.