Friday, September 09, 2005

Health Insurance I - Main Product Types

This is the continuation from my earlier soliloquy on Life Insurance (Parts I, II and III). Since I've talked about Life Insurance, I thought I should complete the picture and talk about Health Insurance too. And since I've also passed the Health actuarial paper liao... *Phew*... I suppose I am *ahem* qualified to talk about it.

For a short glossary of some of the terms and acronyms I use frequently in this post, please refer to Life Insurance I (the first bits).

Health Insurance products are all protection-type policies. So they are all of non-participating design in Singapore, although technically speaking, they could be designed as participating or unit-linked. Keeping them as non-participating helps to lower the expenses of administering them and this keeps premiums low.

Description of main product types:

Income Protection (IP): This covers the contingency of temporary (keyword) disability to work due to illness or accident. Note that permanent disability is usually covered by Life Insurance policies, under something known as total and permanent disability benefit (TPDB). So the IP is usually bought during the working life of an adult or offered as part of employees' benefits by the employer. IPs available in Singapore (and I suspect globally) are all of the regular premium paying type. Can't remember seeing a single premium paying type before.

Permanent Medical Insurance (PMI): This covers the contingency of hefty medical expenses. There are usually a lot of conditions in the PMI controlling how much and what is covered. For example, there is usually a deductible that has to be applied. This is an amount you have to pay out from your own pocket first before the PMI coverage kicks in. There is also usually a maximum amount one can claim in a year and another maximum one can claim in his/her lifetime. The Singapore equivalent of the PMI would be our Medishield. Insurers in Singapore sell policies that builds on the Medishield, something like a booster. This is mainly for people who feel the coverage provided by Medishield is inadequate or a need for better coverage (in the form of better medical services, better hospital beds etc.). Strictly speaking, the PMI is single premium paying since next year's coverage is NOT guaranteed. The insurer will send an offer to renew at the end of the year. But since renewal is almost certainly given, it is like a regular premium paying type of policy.

Long Term Care (LTC): This covers the contingency for the need of nursing care upon reaching old age. So the benefit comes in the form of regular payments of cash which can be used to pay for nursing care OR meeting of nursing care costs directly with the care provider. There are typically a few levels of care available depending on the condition of the person needing care. Therefore, LTC policies are designed with a few levels of benefit payments. Qualification for each level of benefit payment will depend on some objective tests on the person's inability to carry out certain functions such as feeding and dressing. LTCs are still quite rare in Singapore. LTCs can exist in regular premium paying (starting the policy during working life) or single premium paying forms (starting the policy only when need for long term care transpires).

Critical Illness (CI): It is arguable as to what contingency the CI actually covers. It pays out a lump sum upon diagnosis of an illness (known as critical illness) in a pre-determined list. It doesn't really exactly cover the medical expenses required nor does it cover the loss of income. These two needs are better met via the PMI and IP respectively. It could be used to pay for the deductible portion of the PMI, i.e. the portion of medical bills you have to pay from your own pocket before the PMI coverage kicks in. CIs in Singapore is VERY popular. They are often tagged onto Life Insurance policies, i.e. the Life Insurance policy pays out upon death OR diagnosis of a critical illness. Almost certainly of regular premium paying type.

Akan Datang: Health Insurance II

203 days to go.


Post a Comment

<< Home