I already have an HMO. Should I consider adding health benefits in my life insurance plan?

8:19 PM

My answer is a big YES!

Let me explain how these products work to justify my answer.

Health Maintenance Organization (HMO) is an organization that provides access to different health facilities and medical practitioners. Having a Health Card, you are not required to shell out money in order to enjoy the benefits of the plan as long as you use it in any of the HMO's accredited service providers. HMO's have wider coverage. However, the amount of benefit may be limited. If you are employed, most companies offer this type benefit to their employees.

On the other hand, Health Benefits offered by insurance companies work differently. Benefits are payable upon occurrence of a specific event such as disability, critical illness, or hospitalization.

But why should we still consider having health benefits in a life insurance plan even if our HMO or company healthcare will handle all hospital expenses? Why does it make a lot of sense having a health insurance?

When analyzing our protection requirement, there are several things that we have to consider such as immediate needs and future needs. 

For immediate needs, these are expenses associated with a particular event that need to be paid as soon as possible such as hospital expenses, medication, doctor's fee etc. Future needs include other responsibilities such as household expenses, amortization, and personal needs that need to be provided even during recovery. In short, The estimated amount of medical expenses and the income replacement should you stop working during recovery.

HMO can help with hospital bills. This can be your first line of defense since you won't need to shell out money if the expenses are within its limit. But with the design of this product, the limit may not be enough for major medical emergencies. This is when Health Benefits of a life insurance policy come into play.

Let me show you what are the health benefits that you can attach to a life insurance policy.

Critical Illness Benefit -  provides lump sum cash benefits to the insured upon suffering from life threatening illnesses listed in the policy.

Total and Permanent Disability Benefit - this benefit provides either lump sum cash or regular income upon total and permanent disability due to an illness or accident.

Hospital Income Benefit - replaces income for every day of confinement in a hospital or intensive Care Unit and can also provide medical reimbursement for surgery.

All of these benefits are payable in cash that you can use for any reason. It may help you pay hospital bills or can be your source of income upon recovery. The benefit amount are higher than HMO however, illnesses covered are specific.

So ask yourself again, does your HMO provide enough coverage? Will your employer still continue to pay your salary if you cannot work for a certain period? Do you also have a sizeable amount of emergency fund that can last to cover monthly expenses and other responsibilities?

If your answer is no in any of these questions, then add health benefits to your life insurance policy. It does make sense to have living benefits in your insurance policy rather than just plain death benefit. Critical illnesses are the main causes of death anyway and treatment costs a lot!!

Try this interactive template to analyse recommended Critical Illness and Disability coverage.
Template may not work on smartphones.

Note: Above figures are only estimates. Actual need may vary.

Sample Analysis

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