Understanding Insurance: Medical and Health Insurance

Medical insurance is the most important insurance which ensures that you have sufficient money to pay for medical expenses which include consultation, hospitalization, medicine and treatment cost during illness or injury.

In the chart below, you can see some of the most common health risks shown with their frequency (how often they happen) and the severity (how much they cost). Understanding the severity of these illnesses is useful, because if an illness is not considered as “severe”, insurance may not be required, as we should be able to easily pay with our own pocket money for it. Whereas if an illness is considered “severe” this usually means that we need to have at least RM 1,000 to RM 10,000 or even more readily available to pay for the cost.

Examples of Severity and Frequency of common health risks:

The type of risks can be numerous and all relate to your health. An example of the most minor risk is such as a common cold. Most often you are able to pay out of your own pocket for a doctor’s visit. However, medication can at times be quite expensive, so in such a case, medical insurance can be very useful as it can cover those costs for you. These kind of illness is pretty common and you could get them often, this makes the frequency for these illnesses high.

The second health risk is accident. This may not be something that happens as often as the common sickness. For example, when you break an arm, have a heart attack or is injured in a car accident. The hospital cost can be quite high therefore you would want to make sure that an insurance covers you for the treatment cost.

The last risk is the most severe: Death. This is a separate category of risk and will fall into Life Insurance. We will describe this in our life insurance article in more detail.

How do I find the best health insurance and what should I buy?

There are two main types of health insurance that you should consider.
1. Medical & Hospitalization Insurance
2. Critical Illness Insurance

There are other types of plans such as the Disability Income and Hospital Income Insurance that we will not be covering here.

What is Medical & Hospitalization Insurance?

This insurance will take care for most of the cost of treatment for illnesses and also accidents. You will get a medical card that serves as proof of coverage and in most cases you do not need to pay anything upfront during treatment, because the hospital will deal directly with the insurance company for payment. If you are employed, most companies offer their employees a medical plan (often called Group Hospitalization Schemes – GHS or GHSI). You should understand the coverage to decide if it is necessary for you to obtain additional plan as a supplement.

What is Critical Illness Insurance?

The second type of medical insurance is what most people in Malaysia do not have and should consider purchasing. This insurance will cover a list of illnesses (also known as dread diseases). Examples are cancer, diabetes, kidney disease, hearth attack etc.

You might wonder why would you need a Critical Illness plan, if you already have a Medical & Hospitalization cover. The reason is the high cost of treatment for these illnesses.

Take cancer for example, your Medical & Hospitalization insurance will only cover hospital and treatment cost of up to a certain limit. Let’s say RM 100,000. This limit is too low for most of the cancer treatments. Insurance companies call this amount “Annual Limit” or “Sum insured”. If this limit is reached, the insurance company will stop paying even though treatment is still on-going.

In reality, cancer treatment can go really high even into the millions. This means that everything above the set limit, you will need to pay on your own. This is where Critical Illness insurance plan becomes a necessity, so that you are covered for those costs above RM 100,000 or your “sum insured”.

To give a better idea of the impact of the exorbitant treatment cost for a critical illness such as cancer, here are some findings from a study carried out by George Institute for Global Health:

Should everyone buy Critical Illness insurance?

Ideally yes. You don’t want to get into the situation where money becomes the deciding factor of life and death. However, not everyone can afford this insurance plan, and not everyone has the same risk in getting any of the critical illnesses. Speak to a qualified insurance agent, who will go through a list of questionnaire with you in determining if you should or shouldn’t acquire one.

One of the key questions that the agent will ask is your family medical history. This includes if any of your family members have any of the critical illnesses. If yes, then your risk in getting it yourself will be considered as high. Therefore, you should consider purchasing a cover for this known risk.

This concludes our first article describing Medical Insurance. If you have questions, please do not hesitate to contact us or write us a comment. We will be happy to clarify.

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