Ultimate Guide to Health Insurance for Singaporeans

1. Why should you buy health insurance?
2. What are the different types of health insurance?
3. What is moratorium underwriting, and who could benefit from it?
4. How much health insurance coverage is right for you and your loved ones?
5. Why should you get private hospitalisation insurance?
6. What are riders in health insurance and what do they do for you?

Why should you buy health insurance?

Health insurance is one of the main pillars of financial protection. Health insurance includes hospitalisation insurance, coverage for critical illnesses and disabilities, and even coverage for specific factors like maternity.

Many Singaporeans think health insurance just pays your hospital bills, but it does much more than that.

For example, health insurance can:

• Provide for you and your family, if you are unable to work. Even if you can afford to pay the hospital bills yourself, can you afford to go a year or more without a job, while you’re recovering?
• Preserve your investment and retirement plans in times of medical emergencies. If you are faced with healthcare costs that you can’t pay, for example, you could end up having to liquidate your stock portfolio or surrender your endowment policies. This can ruin your long-term retirement plans.
• Mitigate the need for high interest loans. Many uninsured people are forced to rely on loans. They need to borrow to pay for their healthcare, or to sustain themselves when they’re too sick to work. Resorting to personal loans or credit cards incurs a high interest rate and can cause insolvency.
• Gives you the peace of mind. Focus on recovery instead of being worried about the financial burden.

The most important thing to realise about health insurance, is that healthcare costs are continually increasing while you are only growing older. There could be an instance in which you might be admitted to the hospital and thus face large medical bills. You would want to be financial prepared when such things occur.   

As such, avoid viewing health insurance as something you “may” need. Consider it to be something you will need, at some stage in life.

Things to note:

Don’t confuse life insurance and health insurance. Life insurance is primarily meant to help your loved ones when you pass away. Health insurance is meant to cover your medical and related costs.

What are the different types of health insurance?

Basic types of health insurance are:

• Critical illness insurance
• Medical expenses insurance
• Disability income insurance
• Group healthcare insurance
• Maternity insurance
• Specialised insurance for pre-existing conditions

There are other, more specific types of health insurance on the market, such as health insurance for people with diabetes, or health insurance policies for high risk professions (soldiers or competitive athletes).

As long as healthcare needs exist, insurers will continue to innovate and provide. But at a basic level, these are the types you should take the time to understand:

1. Critical illness insurance

These policies provide a payout if you’re diagnosed with a critical illness, such as cancer.

Most critical illnesses, whether it’s cancer or stroke or heart attacks, are defined as being in early, intermediate, and advanced stages.

Early onset critical illness coverage pays out almost as soon as you’re diagnosed (early stage). However, the premiums for this type of policy are likely to cost more than plans that cover only advanced stage critical illness.

Otherwise, most critical illness insurance pays out when you reach an advanced stage of the illness. For example, you may only get a payout if your cancer reaches Stage IV.

Multi-pay Critical Illness Coverage

There is also another type of critical illness insurance: that’s multi-pay critical illness coverage. This means that, rather than paying one lump sum, you will get multiple lump sum payouts at each stage of the ailment, such as during the early, intermediate, and advanced stages. This ensures you’re well cared for throughout the duration of your illness, should your condition worsen.

It is also worth noting that if you have been diagnosed with a critical illness, a typical critical illness plan will only give one payout, following which the policy will terminate. Should you then choose to look for another plan for continued protection, you’ll be subjected to more stringent underwriting, and potentially have your pre-existing condition excluded from cover. Multi-pay critical illness policies, on the other hand, is able to protect you for critical illnesses even after diagnosis and the first payout.

Critical illness payouts can enable you to stop working, and focus on recovery.

If you’re diagnosed with an advanced stage cancer, for example, critical illness coverage can payout as much as 10 years of your income (depending on the amount of coverage purchased). This lets you spend your remaining time doing what you love, rather than still working and worrying about your family.

Gender-specific Critical Illness Coverage

You can also get Critical Illness coverage based on your sex, through AXA Criticare for Him, or AXA Criticare for Her. These policies are specifically targeted at afflictions that are more likely to affect males or females, so you’ll have the coverage you need. The coverage is from diagnosis to recovery, not just for any one stage of your illness. This means you’ll also be covered for surgical benefits (including reconstructive surgery), and support benefits like Outpatient psychiatric benefit which are not covered in most policies. You may consider such plans if your family has a medical history of these gender specific critical illnesses and you’d like to be covered for specific risks that are relevant to your sex and family medical history. As AXA Criticare for Him and AXA Criticare for Her policies cover a specific list of critical illnesses and not the whole range, their premium amounts can be as low as a dollar for every day due to the lower coverage.

2. Medical expenses insurance

These policies are aimed at covering your hospitalisation and treatment costs. Every Singaporean already has a basic version of this, called MediShield. However, it can be supplemented by private insurance policies called Integrated Shield Plans (IPs).

IPs increase the amount of coverage that can be provided (see Reasons to get private health insurance below)

3. Disability income insurance

Disability income insurance pays a percentage of your income, if you’re unable to work due to a Total Permanent Disability (TPD).

For example, the policy may provide an income replacement of 80 per cent – if you make $4,000 a month, and you’re ever disabled and can’t work, the policy would payout $3,200 per month after a given period of time (called the coverage period).

These payouts continue until you resume work, or until the age of 60 or 65 (depending on the policy).

There are two other types of disability income insurance to note:

The first is severe disability income. A severe disability is defined as being unable to do at least three Activities of Daily Living (ADL):

• Washing yourself
• Dressing yourself
• Feeding yourself
• Using the toilet
• Walking or otherwise moving (the ability to move from room to room on a level surface)
• Transferring yourself (e.g. the ability to move from a bed to a wheelchair)

Note that, unlike disability income insurance, this type of policy provides a fixed payout; the amount depends on the policy, and is not tied to how much you used to earn. Also, the payout continues for the rest of your life.

Severe Disability Income is provided for all Singaporeans under ElderShield. ElderShield can provide payouts of up to $400 per month for up to six years, for severe disability (defined as inability to perform at least three of the six activities of daily living – see below for details).

The next type of disability insurance is Total Permanent Disability (TPD) insurance, which is also considered a form of life insurance. In fact, TPD insurance is often part of a life insurance plan, or even some endowment plans.

TPD insurance provides a single, lump sum payout when you meet the criteria of being permanently disabled. In general, TPD means being disabled to the extent that you cannot work ever again, or blindness, or the loss of two limbs (but check with your Financial Consultant for the insurer’s exact definition).

Things to look out for:

You must be employed to get disability income insurance. It should not be confused with unemployment insurance: you will not get payouts for reasons like retrenchment (you must be too injured or ill to do your job).

4. Group healthcare insurance

This refers to health insurance that is provided by your employer. This is often provided as a job benefit and persists for as long as you’re employed by the company.

Note, however, that you have no real control over the policy your employer picks. Also, being in between jobs or unemployed will result in you not being covered by the group insurance coverage. Or say, when you retire, you will also eventually not be covered.

Speak to your employer’s Human Resources department, for information on your group insurance and what it covers.

5. Maternity insurance

Maternity insurance or pre-natal insurance is for expecting parents. The policy provides a payout in the event of complications during pregnancy, as well as any ailments affecting the new-born.

Typical examples of pregnancy complications include eclampsia and stillbirths, while examples of conditions affecting the child include congenital blindness, the absence of two or more limbs, or spina bifida. Mum’s Advantage by AXA has these complications covered to ease the cost of necessary treatments.

Maternity insurance can usually be purchased between the 13th to 36th week of pregnancy. These insurance policies last from the time they’re purchased, to the birth of the child.

Remember that coverage for maternity insurance is usually local and not international. If the child is being delivered in a foreign hospital, for example, the policy may not apply.

6. Specialised insurance for pre-existing conditions

These are insurance policies for people with specific pre-existing conditions.

Under normal circumstances, health insurance cannot cover you for pre-existing conditions. However, some types of policies exist just to cater to people with these conditions.

For example, AXA Cancer ReCover is the first plan in Singapore specially designed to protect cancer survivors by covering recurrent or new primary cancers. This plan provides coverage the case of recurrence or a new diagnosis of any Early to Advanced Stage Cancer.

For example, an insurance policy for diabetics may cover both diabetics and pre-diabetics. This will give a payout for situations such as limb amputation, or blindness, due to diabetes.

These types of policies are only available to those suffer from the specific condition (e.g. you cannot buy AXA Cancer ReCover if you have not been previously diagnosed with cancer).

What is Moratorium Underwriting and who could benefit from it?

If you suffer from a pre-existing condition, or general poor health, it may be difficult to find an insurer to cover you. This is where moratorium underwriting comes in handy.

Products with moratorium underwriting, like AXA Globalcare, means that AXA will cover your pre-existing condition, if you have been “trouble-free” for two consecutive years and have been covered under the policy for at least two consecutive years. AXA defines “trouble-free” as having not received any medical opinion and has not taken any medication or received any medical treatment. If these conditions are fulfilled, you can be covered for your pre-existing condition.

For example, say you had a knee operation five years back. Under normal circumstances, you would be excluded from coverage, if you need further treatment on your knee.

However, if you are insured by a policy with moratorium underwriting for two years, and you are “trouble-free” for at least two consecutive years, your treatment costs can still be covered.

How much health insurance coverage is right for you and your loved ones?

There is no single “correct” amount of coverage, as everyone’s situation is different. If you have dependents, for example, you may need far bigger payouts than someone who is single.

As such, you should always consult a Financial Consultant to ­work out the proper amount of coverage. Nonetheless, these are a few things you need to consider when purchasing health insurance:

For singles with no dependents:

• Medical coverage enough to maintain your current standard of living
• Critical illness coverage to pay up to five years of your income
• Disability income coverage of 50 to 60 per cent of your monthly income

For persons with dependents:

• Post-hospitalisation coverage enough to maintain your current standard of living (we recommend up to $1 million)
• Critical illness coverage to pay up to seven years of your income
• Disability income coverage of up to 80 per cent of your monthly income

If you have dependents, it’s also advisable to consider critical illness coverage that pays out at the early stage of an illness. This is because you have a better chance at recovery – if your cancer goes into remission, you can continue to enjoy and provide for your family for far more than 10 years.

Note that in any case, it is always advisable to have post hospitalisation coverage that is in excess of basic MediShield life. Consider, for example, that the cost of cancer treatment is around $8,400 per month at the lowest estimate.

Withdrawal limits of $600 for scans, or $1,800 for treatments, does too little to manage such costs.

Things to look out for:

Figuring out the right amount of health insurance coverage is a holistic process. This means it has to be worked out in addition to your savings and retirement plan, as well as your life insurance (e.g. if your life insurance already provides enough for your family, you may need less critical illness coverage at the advanced stage).

As such, avoid planning your health insurance without regard for your other policies. A qualified Financial Consultant or Financial Planner can provide a better overall plan.

Why should you consider getting private hospitalisation insurance?

You may be wondering why you need private hospitalisation insurance, when every Singaporean has MediShield life.

The reason is that an Integrated Shield Plan (IP) can enhance your MediShield. There are three tiers of IPs:

• Class B plans (standard)
• Class A plans
• Private hospital plans

Under basic MediShield Life, you have sufficient coverage for hospitalisation in up to Class B2 wards, in public hospitals (you can opt for a more expensive ward but note that your payouts won’t suffice to cover the cost).

A standard tier IP, however, can cover hospitalisation costs of up to Class B1 wards. The next tier up can cover Class A wards, and the final tier can cover just about any kind of ward, even in private hospitals.

(Note that for wards of Class B1 or below, you cannot choose your own doctor).

In addition to this, an IP will cover costs that go beyond your Medisave Withdrawal Limit. For example, the Medisave Withdrawal Limit on costly Class 7C surgeries is capped at $7,550. If the surgery costs anything more than this, you’ll have to pay the excess in cash.

Under AXA Shield, however, the limit is significantly increased to cover the costs as charged. Do note that you will have to pay for deductibles as well any required co-payment.

For the full list of withdrawal limits, see here.

There are also limits for outpatient treatments under basic Medishield. For example, if you have cancer, you will need to return constantly for further treatments. Under basic Medishield, you are covered for only up to up to $3,000 per month for chemotherapy and up to $1,800 per radiotherapy treatment.

Under AXA Shield, however, your claim can continue until you have reached $1 million (for pre-, during, and post-hospitalisation treatment).

As such, complementing your MediShield with an IP provides a much greater safety margin.

Things to look out for:

The premiums for your IP can be paid through your Medisave account, up to your Medisave withdrawal limit. Riders, however, need to be paid in cash.

What do riders in health insurance policies do for you and should you get one?

A rider is an optional add-on to your IP, which many Financial Consultants recommend. This affects your maximum co-payment amount.

Without a rider, the co-pay for your hospitalisation costs is usually 10 per cent. This means you must pay the first 10 per cent of the bill, before your insurance will cover the rest e.g. if your total hospital bill is $7,000, you will have to pay $700.

If you have a rider however, the co-payment can be reduced to just five per cent. An example of this is the AXA Enhanced Care rider. This also caps your co-payment at $3,000, which means that, if five per cent of your treatment would exceed $3,000, you would still only pay a flat $3,000.

(It was previously possible to buy riders that reduce co-payment to zero, but these are no longer available. The five per cent co-pay is a government mandated minimum).

Riders are paid can be paid for monthly or annually, and costs vary for each individual. Unlike your IP premiums, however, they cannot be paid with your Medisave. You need to pay for them in cash.

Disclaimer:

This article is for general information only and does not take into account the specific investment objectives, financial situation or needs of any particular person. The views expressed herein do not necessarily reflect the views of AXA Insurance Pte Ltd and should not be construed as the provision of advice or making of any recommendation. There is no intention to distribute, or offer to sell, or solicit any offer to purchase any product. We recommend that you seek the advice of a qualified financial advisory professional before making any decision to purchase an insurance or investment product. Whilst we have taken reasonable care to ensure that all information provided was obtained from reliable sources and correct at time of publishing, information may become outdated and opinions may change. We are not liable for any loss that may result from the access or use of the information herein provided.