Planning To Give Up Your Hospital IP Insurance Because Of Inflation? Here’s What You Should Do Instead
Hospital Integrated Shield Plan (IP) insurance has been getting the limelight in recent months, no thanks to its increasing premiums. What makes this even more poignant is the fact that the increase in premium comes at a time when everything else is getting more expensive with inflation. And the numbers say everything.
From 2020 to 2023, 2.2% of Hospital IP insurance holders over the age of 60 have given up on their Hospital IP insurance. In particular, Hospital IP insurance covering private hospitalisation is becoming less popular over the years. In 2023, only 38% of Hospital IP insurance holders are insured for private hospitalisation compared to 40% in 2021.
What Is Driving This Behaviour?
When diving into this data, the question begets: What is exactly driving this weird behaviour among Singaporeans?
We Are Already Covered By MediShield Life
One reason why Hospital IP insurance holders are opting out of Hospital IP insurance is because of MediShield Life.
If you don’t already know, every Singaporean and PR who contributes to CPF is covered by MediShield Life. It is a universal healthcare insurance administered by CPF Board to help you and I pay for large hospitalisation expenses.
The premium for MediShield Life is paid for by you, i.e. through your MediSave even though you might not exactly see the cash outflow from your pocket.
Since you are already financially protected for falling sick, why spend additional out of pocket dollar for Hospital IP insurance? That’s probably the kind of thought that goes through some of our minds when deciding to terminate your Hospital IP insurance.
Escalating Cost From Hospital IP Insurance
If you haven’t heard the news, five out of seven insurers that offer Hospital IP insurance are going to raise prices.
Couple this with the rising cost of living in Singapore and slowing job market, everyone is rethinking about budget allocation. For those who are looking to cut “unnecessary” expenses, money spent on Hospital IP insurance might be a “good” target to cut. This is especially so when it gets more expensive to maintain your existing Hospital IP insurance.
Why This Isn’t The Right Thing To Do?
Hospital IP Insurance Is A Need, Not A Want
If you think that Hospital IP insurance is an “unnecessary” expense, think again. Because as humans, we are more vulnerable than we think. The risk of us falling ill increases as we age. Therefore, Hospital IP insurance is almost like a necessity rather than a want.
There’s also good reason why you want to keep your Hospital IP insurance in handy. Forfeiting your Hospital IP insurance is like stepping out of your home in September without an umbrella.
For most days, you will enjoy having a lighter load since you don’t have to carry your cumbersome umbrella. In the case of Hospital IP insurance, this means less expenses to pay for.
But if it starts pouring heavily, you are going to lament not having an umbrella by your side. This applies to Hospital IP insurance. You only regret not having it when you fall sick.
Why Give Up Everything When You Can Downgrade?
Hospital IP insurance comes in three tiers: Private hospital, Public Hospital Class A, and Public Hospital Class B1.
If you are currently on the highest tier (i.e. Private hospital), you have the option of downgrading to Public Hospital Class A or Class B. This works if you do not actually require treatment at private hospital and you are willing to opt for treatment at the public hospitals instead.
Rightsizing Your Hospital IP Insurance: What Should I Consider?
Do I Really Need This?
Apart from not being aware that you can actually downgrade your Hospital IP insurance, the other concern is whether you should really be doing it.
This is where the question of “Do I really need this?” comes into play. And based on data, it seems that finding the right size for your Hospital IP insurance is something that affects many people.
According to Ministry of Health (MOH), a significant number of people often pay for the highest possible coverage. But when they eventually have to seek medical care, they often opt for a lower class ward than what they actually paid for.
For e.g., you have a Hospital IP insurance for private hospital, but you choose to seek medical care at a public hospital instead. In fact, statistics from MOH show that, among those with private hospital IP insurance, less than 50% actually seek treatment at private hospital.
Takeaway: If you don’t care for an expensive hospital treatment, then there’s no point paying for one.
Affordability
We know that premiums for Hospital IP insurance are rising. With that in mind, can you still afford your insurance premiums?
The math is simple. If you can no longer afford the cash payment needed for your Hospital IP insurance, that’s a clear sign that you should downgrade even if you really feel that you need that top tier insurance plan.
Takeaway: If your Hospital IP insurance premium is taking up too much of your monthly expense budget (>20%), you might want to consider downgrading your Hospital IP insurance.
Life Stage Matters
The risk of falling ill increases with age. As such, Hospital IP insurance premiums also go up with age. That’s because as you get older, the likelihood of you needing medical treatment goes up. Higher risk of falling ill to the insurer means that you need to pay a bigger share in advance to make financial sense for the insurer to insure your risk.
But here’s the thing. As you age, your life stage also evolve. This affects both your outlook in life and also the people that you need to care for.
Life Stage Contrast: When You Are 30 vs When You Are 70
When you enter your 30s, you are in the prime time of your life. You might be entering the parent phase where you just had your first child or you might be summiting the corporate ladder. At this stage, you want to have the best financial protection in case you fall sick. Therefore, it makes sense for you to pay for a Hospital IP insurance for private hospital.
Fast forward time to 40 years later. At the age of 70, you have already lived a purposeful life. Your kids have already grown up and started their own lives. You are just enjoying your daily kopi with your coffeeshop kakis. Are you still worried about falling sick? Maybe not. And even if you do, do you really still need medical treatment at the private hospital? Perhaps not.
Takeaway: Review your insurance needs periodically as you progress in life. Don’t overspend your hard earned dollar on being overinsured when your life stage has changed.
Get A Professional To Review Your Portfolio For You
While we have provided tips to help you decide on what to do with your Hospital IP insurance, we know that it can be still difficult to navigate for some of us. That’s why we think it is always important to have a trusted financial advisor to give you the right advice.
If you have one, it’s like having a trusted sidekick that’s even better than ChatGPT! From time to time, you get a free and comprehensive review of your portfolio and your financial health. When things need to change, you get great advice on what needs to be tweaked to stretch your dollar further.
If you don’t already have a trusted sidekick by your side, book an appointment with us today below. We can start off by providing the personalised advice on what you should do with your Hospital IP insurance plan today.
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