Oh, Insurance!

Do you have medical insurance? If you don't, you should get one soon, seriously. If you are below 30 it's even better to get one soon - premiums are low for this age band.

I had a conventional insurance with Prudential and was thinking on converting all my insurance/investments to Islamic based products. Unfortunately, I was recently diagnosed with a non-life threatening heart condition which requires no surgery nor drugs (touchwood, at least for now, that's what I'm told). After I declared my entire health record (including the heart condition) for the Islamic policy, they refused to cover me for heart related conditions.

Which got me guessing, what the hell am I getting insurance for? I never liked insurance people in the first place. Always too persistent in selling and liat to pay when the bill falls due. Anywaym that's besides the point.

Even if I didn't declare my existing condition, there is possibility they might found out years later it was pre-existing. Which also means, there is high chance they won't pay the hospital bills related to heart conditions/complications in future (God knows how much it would cost medical care at that time!).

So, since I didn't want to risk ending up getting nothing, I was honest and that, my friend, had backfired me. In fact, they want me to top up my premium by RM130 to get the same coverage as I did in my previous policy (which was signed up 2 years ago)!

My point is - get a medical insurance (or a life insurance, at least) while your health can still afford one. I repeat, health, not just cash.

So for those insurance virgins you might be thinking how do you choose the right policy?

There are two major parts in a typical medical policy (don't be confused with life insurance policy OK? Life insurance usually pays only if you die).

The first type of coverage is usually death and physical diability benefits - loss of legs, toes whatever. This part is less likely to happen if you're young (unless working in a hazardous factory or something).

The other coverage is what I call the real benefits which you might want to pay extra attention to. They are medical benefits which cover things like surgery claims, hospitalisation bills, daily hospital allowance benefits (yeah, you can even get paid spending overnight in the ward) etc.

My experience talking to insurers is that sometimes people think they pay enough for their insurance. You might be paying, say, RM100 to RM200 per month. Looking at the value of RM250,000 for death benefits is absolutely tempting merely paying RM200 per month. Because of the large payouts for death benefits, it is likely that you might have minimal or low medical benefits - for the coverage of hospital bills, surgery etc. It may not be enough and it can be easily maxed out 20 years down the road! So it looks like unless you die, you are hardly getting anything much from your policy (except maybe your descendents).

Naturally, if you are self-employed, the more you should consider having higher the medical benefits in your policy than death and physical disability benefits. Since noone else is covering for your hospital bills, you might as well go all out in the former part than the latter.

As for those employed by others - do not feel that you are safe without insurance. You'll never know how long you can keep your job. God knows, one day if you become terminally ill and have to resign someday (I pray you do not fall into this category so soon or ever), hence, ceased coverage from your employer.

Some policies are also a combination of insurance and unit trust. My recommendation make your life simple. Insurance unit trust doesn't really make money. So, park your money for insurance in a pure insurance company (you will not get your money back as there is no investment but your coverage would be superb) and unit trust for those who really do that business e.g. Public Mutual.

I also heard that most insurance policies do not pay sustenance when you are in-between situation - too sick to work yet you have not lost any limbs or paralysed. So basically, during this period, if you don't have passive income, you are likely to live on your savings (if you have any). So, you might want to check on some policies that give some sort of 'pocket money' during this stage of illnesses. Usually, it's pretty low - RM1K per month, which could hardly make a difference 10 years down the road. So people forgo this to maximise other parts of their policy or even pay extra premium to increase this portion - for fear of having no income when terminally ill.

It feels like gambling now, doesn't it?

If you get sick and hospitalised regularly, like me, medical benefits is more important than death or physical disability benefits. If you think you won't get hospitalised and terminally ill in the next decade or so, you can gamble on maximising payouts in case of loosing a limb or two, or even death, which at the same time is likely to reduce your medical benefits. It is unlikely you can have best of both worlds unless you're paying a bomb.

So, in essence, choose your policy wisely. For those who have, do revisit your policy document and analyse it. You might want to change a thing or two on your coverage after looking back at your initial choice.

Most importantly be prepared, cause you'll never know. Like me, I never thought what I have could be taken so seriously by these people.

Oh, well. Afterall, it's all about the money.

ps: I'm not an insurance agent. I do know some really good ones, if you want me to refer them to. Trust me, they are the ones who gave me all this insurance education thingy. :D