Healthcare Insurance

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Relationship between Critical Illness Benefits and Medical Insurance Coverage

Recently, a number of doctors have pointed out that some patients do not have a clear understanding of the benefits their critical illness and medical insurance plans provide. Upon submission of their claim application, these patients often find that part of medical expenses need to be covered from their own pockets. What, in particular, should people be aware of when they sign up for medical insurance?

Many insurance policies offer protection for critical illnesses, but generally many insureds tend to overlook that, after receiving claims for critical illness benefit, the remaining benefit left in the policy may be insufficient to cover future expenses. This normally happens as the insured fails to realise that critical illness cover usually serves as a rider on top of the basic policy in which the insured is eligible to one total lump sum benefit only. Once the insured is diagnosed with critical illness, claim amounts will be deducted from the total lump sum. This claim amount may actually take up a significant portion of the total lump sum, leaving an insufficient amount to cover future claims. The table below shows an illustration:

Background information:
The insured is diagnosed with a critical illness and hospitalisation charges are HK$360,000. The amount of critical illness benefit entitled is HK$500,000.

Item

Amount (HK$)

MSIG MediSure Plus

Company B’s Life Insurance

Maximum Limit Total: 2,000,000 Total: 1,000,000
(A total lump sum included life insurance and 500,000 critical illness protection)
Critical Illness Benefit Amount:
500,000
Medical Benefit Amount:
1,500,000
Eligible Amount of
Medical Benefit
N/A 360,000 N/A
Eligible Amount of
Critical Illness Benefit
500,000 N/A 500,000
The insured has to pay on his own 0 0
(The insured is entitled to a reimbursement of 360,000 for medical expenses)
0
Remaining Benefit 0 1,140,000
Medical
Insurance

(Can be used for future medical expenses)
500,000
(This amount is only payable to the beneficiary after the death of the insured. In other words, if the insured needs other medical expenses while he is alive, the policy will not provide the necessary coverage.)

As illustrated above, many insureds would only consider the maximum amount of coverage when they sign up for a policy, overlooking the relationship between critical illness and other benefits. The HK$1,000,000 maximum limit of Company B looks sufficient at first glance. However, after deduction of claims payment, the remaining amount for life insurance will become considerably less.

Therefore, we would recommend the insured to purchase insurance plans providing separate benefits for critical illness and hospitalisation benefits. In the unfortunate event that the insured is diagnosed with a critical illness, he will be eligible to receive a lump sum critical illnesses benefit, as well as a hospitalisation benefit. Most importantly, the amount of critical illnesses benefit will not be deducted from the hospitalisation benefits, thus helping the insured to manage the medical expenses without disruption to their wealth management planning.

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