Planning for medical expenses


Medical Expenses Thoughts

If you’re not paying for it through the health plan, you pay for it in the emergency room ~David Lehman

Planning for medical expenses is one of the basic building blocks for financial planning (singapore). To leave it out of your planning is like sailing in the treacherous water without a lifeboat. It might seem like buying a lifeboat is a waste of money. Especially, if you don’t use it. However, if an unforeseen circumstance were to strike, would you want to see your beloved boat go up in flames with you in it?

It will never happen to me. I’m healthy. I’m still young. Nothing will happen to me.

Does this sound familiar to you? If that is really true, ask yourself a simple question.

Do you know of friends or family members that got admitted to the hospital before?

Still, people feel that they will be the special ones that defy statistics. In Singapore, 1 out of 3 people will be diagnosed with a critical illness. Medical inflation (cost of heathcare services) is on the raise. Singapore gross medical inflation is 15%!! When was the last time your pay increases 15%?

The only way to do it is to hedge against hospitalisation and to do it as soon as possible. If you still don’t know whether you have a hospital medical expenses protection, it is highly likely you have the following misconceptions.

Myth 1: I can wait until I’m older where the probability of getting a illness is higher

Insurance does not work in this way. We can only insure someone before anything strikes him. When will you know you will be diagnosed by a critical illness? You will never know. Some people get it in their 10s, some in their 40s, some never get it. However, once a critical illness strikes, this person can never get to buy an insurance plan again.

Myth 2: I already have Medishield-Life and I think it is enough

Congratulations. You are one of the more financially savvy who knows about Medishield-Life. Before you think it is enough, do you know your coverage for Medishield-Life? What is the maximum amount you can claim for a surgery?

If you take a closer look, the limit for a surgery procedure is only $2000. While this is basic coverage, it would not be able to cover for serious hospitalisation cases where bills can run into the $100,000s. Would you want to be caught in that scenario where you can only claim 2% of your hospital bills?

Myth 3: My company will pay for my hospitalisation bills. 

Group insurance has great benefits but it may not be enough.

Normally, your employer may provide you with life insurance equal to one or two times your salary (around $50,000 in Singapore). This may be sufficient if you’re single and it’s enough to cover personal debts. However, it might not be enough if you have a family.

Even if you are able to purchase an additional amount from the company, you may lose it when you leave your job. Food for thought. Will you stay at your company forever? Will your company keep you if you are unable to perform your work? What will happen to your coverage then?

Would you want be caught in a situation where you have no coverage?  “I went through denial, anger, depression, and finally, acceptance. The reality is, stuff happens, and genetics have a way of prevailing, no matter what we tell ourselves.” by Pierre (who suffers from a critical illness at 39).

 

The “unfortunate” story

The below is an experience of a friend’s parent who does not have hospitalisation plan. Would you want your loved ones to suffer for a few days before getting admitted into a hospital or do you want them to get the best treatment immediately?

 

 

The “fortunate” story

I received a call from one of my client a week ago. He mentioned he needs to go for a surgery for his condition. Through the phone, I could hear uncertainty, fear and a bit of sadness. I had to work with him to understand his condition. Fortunately, he has a hospital plan and the insurance company paid out $57,159 for this surgery. This is excluding any follow up that has yet to happen. We often say we save for rainy days, just in case we need money. Is this scenario a case of rainy days? Would you want to save $57,000 in your bank account, do nothing with it so as to prepare for a rainy day like this? At the same time, you ONLY prepare for ONE rainy day!! Do you know how many rainy days will come?

In Journey with money, we want to empower individuals to retire early and avoid financial pitfalls such as this. Such a financial pitfall will delay retirement by at least a decade if not forever. If you already have a financial plan or a financial planner, that’s fantastic. You should be proud that you have taken the first step. However, there are many still unaware of this. We will like to offer our readers (even if you have a plan already or not) a free review by our in-house Financial Planner. He will cater a uniquely designed portfolio for your specific needs and your journey with money.

Feel free to leave comments below or contact him at chengkokoh@gmail.com

As we practise value investing in Singapore, don’t forget to have proper protection against critical illnesses!

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