April 2, 2014

How Much Insurance is Enough?

By Aldric

This afternoon I saw an interesting post on Facebook:

Enough with the present insurance!! Don’t force people to buy. I already have one insurance plan. What insurance is there to add??? Ishhhhh

Insurance is no doubt a heavy commitment. Every month you may spend from RM100 of your hard earned money! It’s not like you get to check into a hospital at will, right? What can you do with the RM1,200 spent per year?

What Keeps Me Up At Night?

Every now and then someone shares news on Facebook: John Doe was admitted into the Sarawak General Hospital (SGH). Very critical. Jane Doe was admitted into KPJ and needed to undergo an operation! These news keep me up at 3am.

I laud and respect the government healthcare professionals. But let us be realistic: the government healthcare system is a free system meant for all. Being in Kuching, the SGH is the mother hospital for the whole of Sarawak. The system must cater to the thousands each and every day.

Having a phobia of hospitalisation, and knowing the cost of medication, I wondered if my PruHealth Assist plan is enough. Incepted in February 2007, my late mother paid RM169 each month until January last year. What this does is it includes a medical card. At a certain rate, Prudential Assurance Malaysia Berhad will cover the costs of hospitalisation. Upon diagnose of one of the 36 Critical Illness, I would be given a lump sum of RM50,000 and Prudential will continue to maintain my plan.

Fortunately, or unfortunately, I was able to benefit from my insurance plan. My admission into the hospital (ColumbiaAsia Miri) for six days plus an appendix removal surgery cost just over RM16,000. My mother had to fork out RM1,000 from her pocket. In January 2014, I also got news that my plan yields an extra RM8,000++ from the investment plan included in the package. In total, I have enjoyed over RM24,000 from this!

But is RM50,000 enough? In the event of my death, is RM50,000 all I am leaving my siblings? When I am diagnosed with one of the 36 Critical Illness, is RM50,000 adequate to cover my living expenses?

I Believe I Am Worth More

It used to keep me up at night – especially after my mother’s passing: will my insurance be enough? If hospitalised, I want to be admitted into a private hospital with a single-bed room. Is my insurance sufficient to cover that? Is RM50,000 enough?

More importantly, will I have enough cash to pay for my expenses, treatment and living cost?

Thus in April 2013, I took out two additional plans. Initially I wanted the PruMultiple Crisis Coverage at RM200 premium. My agent advised against it. Instead, she insists that I take up the RM89 plan and allocate RM100 for PruLink One. And so I did.

Consequentially I increased my pay out for critical illness. Upon diagnosis, Prudential will pay me RM200,000. My hospitalisaion still allows me to be admitted into the usual private healthcare. In the next 12 months, I will be revising my plans further so I am prepared for better.

Loss of Control

Paying a monthly commitment of RM358 is scary – and expensive! In my case it is usually because I do not know what I am paying for. When I don’t know what I am paying for, I don’t know how to use it.

In addition to that, “the rising cost of treatment and hospitalisation” is such an ambiguous term. Pause a moment. It can mean anything. Since I have my parameters (hospitalisation in a private hospital like Normah or Timberland, with a single bed room), all my agent had to do was tell me if I had enough or not.

So moving into control of my plans helps me emotionally justify why I am paying RM358 in premiums each month.

Other Insurance?

Insurance means protection or coverage during unwarranted events. Insurance is meant to pay for things you cannot immediately fork out of your pocket. In fact, even if you do have the cash, why not transfer the risk? No doubt there are terms and conditions.

Prudential offers a range of basic products (term life/death, Temporary or Permanent Physical Disability and Accidental). In addition to that, there are other rider plans. The basic coverage can either be investment linked or traditional. When your plan is investment-linked, some of your premium will be directed to a Prudential specified mutual fund. Traditional plans are plans without such investment or savings.

Rider plans are add-ons to the original plan. A popular necessity is the “medical card”. With a medical card, all you do is present the card during admission. At a panel hospital, part or all of your expenses will be paid by Prudential. Another rider that is growing in popularity is the “clinic card”. With a clinic card, you are given an allocation for your clinic visits. Present the card and your bills are taken care of by Prudential.

We also have what is known as PruPayor Basic and PruPayor Basic Enhanced. These are useful for plans with savings or investments. When you are diagnosed with the 36 critical illnesses, your plan is continued. Prudential will then pay your insurance bill for you for free. Also, if you have a minor sibling or child, one of them will enjoy “free insurance” until they turn 25 years old. Their insurance is free because Prudential pays the premium each month.

Bringing it all back together, are you covered enough? Do you know exactly what you are paying for? When you are admitted, do you know what you enjoy?

Do you think your coverage is enough?