Medical insurance is often described as an umbrella; you won’t see how handy it is until a rainy day. The ‘rainy day’ in this case is a medical emergency or a sudden illness. During such times; you’ll really wish you had one. But would you have wished you had two (or three, or four?).

For some, the idea of buying multiple insurance policies for just one area in life may seem strange but many Malaysians are getting into the act of buying more than one policy be it for life insurance, medical or personal accident. Yet, just because a good number of people do it, it doesn’t mean you should too.

In this article, we tell you why you need to think long and hard about that second medical insurance policy.

The Principle of Reimbursement

Medical insurance works on the principle of reimbursement unlike a life insurance policy. What does this mean? Reimbursement is simply the act of repaying an amount of money which you’ve forked out to pay for an event covered in your policy. So, if Suzy paid RM500 for medication for her chronic asthma and this was covered in her medical insurance policy; she will be repaid RM500: nothing more and (hopefully) nothing less. Sometimes, you will be reimbursed less than the amount you paid depending on the terms in your policy but you’ll never be given more.

Contrast this with a life insurance policy and you’ll see the difference. If our same subject, Suzy bought two life insurance policies for herself with her children as her beneficiaries – upon her death, her children will receive payouts from both policies. This is simply because you aren’t ‘reimbursing’ a person’s beneficiaries for the ‘cost’ of the insured person’s death. Such a principle would no doubt be absurd!

This is why, having two life insurance policies with a payout of RM100,000 each to be paid upon the insured person’s death is more value for premiums paid as opposed to two medical insurance policies with a similar payout for critical illnesses. If you are diagnosed with a disease which costs RM30,000 to treat and your policy states you can receive up to RM50,000 for that particular disease; you will still only receive RM30,000 upon approval of claims.

So, I shouldn’t buy more than one medical insurance policy?

As with most decisions you make in life; the answer to this is: “it depends…” There are some instances where a second policy may be helpful. Here are three instances where having more than one medical insurance policy could do you good.

1. You have two medical policies covering different illnesses. Though many policies are standard with the usual exclusions – you will find some which defer. Pay close attention to what the policy covers and what it doesn’t so you can find another which complements the one you already have.
2. As a ‘top-up’. It’s common knowledge that even private hospitals aren’t made equal and that medical costs are rising every day. Many policies with limits of RM30,000 to RM50,000 may not be enough anymore to cover the cost of being treated for many illnesses. Here is where a second policy can act as a ‘top-up’ if your current policy limit isn’t enough to cover your medical bill. Of course, you will only be reimbursed the exact amount in your bill and this will be subject to both insurance policies’ rules and requirements.
3. In addition to the medical insurance provided by employers. The medical insurance you get from many workplaces are usually basic policies with low limits. In many instances, an additional policy to this will prove useful. Also remember that the moment you leave your company, you will no longer be covered. As such, a policy taken out personally will ensure you are always covered no matter where you work.
4. For the life insurance double-up benefit. Many medical insurance policies double up as life insurance policies too. Instead of buying one medical and one life insurance policy – you could also buy two medical insurance policies instead. The second policy will be able to work as a ‘top-up’ should you need one and if not – as a life insurance policy. However, before deciding to do this; read the terms of your policy and compare premiums to get the best deal. Avoid paying more for coverage you don’t need!

Unless you can afford the extra expense and will make good use of the policy; having multiple medical insurance policies aren’t usually necessary.

 

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• Personal Finance
• Principle of Reimbursement