Lately, I did a webinar session on medical insurance with Malek Ali, the founder of Fi Life. Of which, I had received tons of questions on this subject matter and I realised that there are still quite a number of misconceptions about it. Hence, it is important to address these misconceptions so that we all could have a better idea on the real purpose of having one ourselves. In this write-up, I’ll debunk as much as 5 misconceptions that I found about medical cards in Malaysia.
Misconception 1: I Don’t Need One as I Already Have Medical Benefits from My Employer
So, it seems like buying our own personalised medical card is a waste of money. Why do we need another card when we already have one from our employer?
Here are two questions:
1. Will you be working with your current employer for life?
Could you retain your medical benefits after you leave your company? For most employees, their medical benefits shall cease after departing from their current employers. So, unless you can always be assured of a decent job waiting for you all of the time, I think it is wise to get our own personalised medical card.
2. What are the Benefits Offered by Your Corporate Medical Insurer?
From our webinar, I discovered that there is a huge gap in the coverage amount offered by a personalised medical card and by corporate medical insurance. As I write, it is quite common for one to have RM 1+ million in annual limit if he has a personalised medical card. It is a far cry from RM 100,000 or lesser offered by corporate medical insurance. Thus, the question is, ‘Is having RM 100,000 good enough to pay for medical and hospital bills when it arises today?’
Misconception 2: Medical Insurance vs Critical Illness Cover
I realised that many have mixed up the two and hence, I would explain how the two are different in terms of their purposes.
1. Medical Card
It is used to pay for our medical and hospital bills, which is a good alternative to paying for them through digging our own funds.
2. Critical Illness Coverage (CI)
It is used to finance our living expenses (including our family members), nursing costs, and medical treatment costs which are not covered by a medical card. As such, CI coverage is viewed as a vehicle to replace the amount of active income that a person could have earned if he is not diagnosed with a critical illness.
So, which of the two is more important?
Personally, I have both medical insurance and CI coverage. With that being said, I started off with a medical card and subsequently, I bought and added onto my CI coverages progressively as my income increased. Thus, if you are starting off, you may follow suit, buying one insurance product at a time based on what you could afford presently.
Misconception 3: Standalone Medical Card vs ILP-based Medical Card
ILP = Investment-Linked Insurance Policy
Which of the two medical cards are better?
You may shop around for a suitable medical card from different insurers. Thus, I would suggest you to get a few quotes before deciding on one.
Personally, I had a standalone medical card when I wasn’t earning much. This is because a standalone medical card is more affordable.
But soon, I have upgraded mine to an ILP that comes with a better medical card as it offers a much higher annual limit and has zero co-insurance. I’m paying for a higher premium for this policy for it consists of life insurance and CI coverages and unit trust investments. Despite it being a bundled insurance deal, I view my ILP policy as my own personal medical insurance policy as the coverage amount for death, total permanent disability (TPD), and CI are low for this policy.
Misconception 4: If I Buy a Standalone Medical Card, Its Premium Will Go Up
The rise in premium is more apparent if we buy standalone medical cards.
It is less obvious if we buy a medical card which is embedded within an ILP. This is because we pay a fixed premium on our ILPs and thus, creating a false illusion or misconception that the premiums of our medical cards in our ILPs are fixed.
The truth is this:
Medical cards, be it standalone or within ILPs, will rise in premiums over time.
Here, let me explain the premium structure of a typical ILP and from which, you will understand why ILP can maintain a fixed premium over the long-term.
So, let’s say, you are 30 years old today and you intend to buy an ILP comprising life insurance and CI coverage and a pretty nice medical card. Your premium for this policy is RM 200 a month, which is a sum higher than a standalone medical card. Here are some things to take note:
a. The actual premium of your medical card is low as you are young.
b. You incur costs on life insurance, CI, and on your medical card.
c. You also would pay commission to your life insurance agent.
d. Then, your insurer will invest whatever is left into your designated unit trust.
e. Your choice of unit trust is limited to funds managed by your life insurer.
Then, fast forward to 50 years, it is likely that you will continue to pay RM 200 a month for your policy. This is despite ongoing growth in your actual premium of your medical card as you aged. Why?
This is because the jump in life insurance, CI, and medical card costs are paid by the accumulated investment value from your unit trust in the ILP.
You will be required to add premium to your ILP, if you have fully exhausted the cash value within the ILP.
There is no such a thing as fixed premium medical insurance.
It is always going to be on the rise due to age and medical inflation.
Misconception 5: It’s Better to Invest my Money as Medical Card Doesn’t Have Cash Value
Well, I am for investment to build sustainable wealth for the long-term.
But, I am also in favour of a medical card as a tool to protect my finances.
Personally, a person with the comment above is like one who thinks that all you need is Ronaldo to win a football match. Other players aren’t that important.
Think about it.
Imagine yourself as a football manager.
Would you put in 11 Ronaldos (all strikers) to play a football match?
Or, will you have a goalie, defenders, midfielders, and strikers on your team?
A smart football manager will choose the latter.
Likewise, a financially savvy person will use tools which are defensive to protect his wealth and tools which are offensive to build his wealth. He would include a medical card as a team member of his defensive line up and would also include let’s say, stocks and properties as his offensive line up to build wealth.
In fact, a financially savvy person can earn passive income from his investments and of which, use it to pay for his life insurance, CI, and medical card. Hence, he will create a synergy between defense and offense as they could work in unison to elevate his financial league to the next level.
I hope this write-up could clear up some misconceptions that you might have in regards to what a medical card is and why we all should have a good one. Thus, if you have any questions on medical insurance, please feel free to post yours in the comment section below.
Also, if you wish to have a quick quote on medical insurance, you can check out Fi Life’s online medical insurance platform to get one in 5-10 minutes.