With an estimated 20,000 to 30,000 financial planning practitioners in Singapore, it’s common for Singaporeans to be approached by multiple agents offering health insurance products.
This typically starts as soon as you enter the workforce, when financial planning becomes a topic of discussion among peers. It’s also likely that some of your friends have pursued a career in the insurance industry as financial planners.
While health insurance remains a crucial part of financial planning, many people risk over-insuring themselves, spending more than necessary on policies that provide excessive coverage or duplicate benefits. Given rising healthcare costs and evolving insurance policies—including changes to Integrated Shield Plans (IPs) and riders in recent years—it’s more important than ever to optimise your coverage without overspending.
In this article, we’ll share simple ways to help you avoid unnecessary expenses while ensuring you have the right level of protection.
# 1 Understand The Different Types Of Health Insurance
The first step to making informed decisions about health insurance is to understand the various types of coverage available in Singapore. With insurance companies using different names and marketing terms for their policies, it is easy to get confused.
There are five main types of health insurance in Singapore:
Basic hospitalisation medical insurance – Sometimes referred to as medical expense insurance, this covers hospitalisation costs, including surgery, hospital stays, and other medical expenses. MediShield Life, a national health insurance scheme, provides basic coverage for all Singaporeans, but many choose to supplement it with an Integrated Shield Plan (IP).
Hospital cash insurance – This provides a fixed daily cash payout for each day of hospitalisation, regardless of actual medical expenses incurred. It is typically used to cover additional costs such as transport or loss of income during hospital stays. It’s usually a rider that can be add on to your hospital medical insurance plan.
Critical illness insurance – This provides a lump sum payout upon diagnosis of a covered critical illness, such as cancer, stroke, or heart disease. The payout can be used for medical treatment, living expenses, or other financial commitments.
Disability income insurance – This replaces a portion of lost income if the policyholder is unable to work due to a disability. Unlike critical illness insurance, which provides a lump sum, disability income insurance offers regular payouts, typically until recovery or retirement age.
Long-term care insurance – Designed to support those with severe disabilities who require long-term assistance with daily activities. In Singapore, ElderShield and CareShield Life are national schemes that provide payouts to those who meet the eligibility criteria.
# 2 Understanding Singapore’s National Health Insurance Policies
The next step is to understand Singapore’s national health insurance policies.
MediShield Life was introduced as the country’s basic hospitalisation medical insurance plan. Coverage under MediShield Life applies to all Singaporeans and Permanent Residents (PRs), regardless of age or pre-existing medical conditions.
This means that MediShield Life automatically covers the elderly, those with disabilities, people with special needs, and individuals with existing health conditions. The scheme is designed to help pay large hospital bills and select costly outpatient treatments.
CareShield Life and ElderShield
For those turning 40 before 2020, you would have been automatically enrolled in ElderShield unless you opted out. ElderShield was a severe disability insurance scheme designed to provide financial support for individuals with severe disabilities through monthly cash payouts of $300 or $400 for 60 or 72 months upon diagnosis of a severe disability. While ElderShield did not exclude individuals with pre-existing illnesses such as diabetes or high blood pressure at the point of auto-enrolment, those with pre-existing severe disabilities were not covered.
Since 2020, ElderShield has been replaced by CareShield Life, which offers lifetime coverage with higher payouts that increase over time. Unlike ElderShield, enrolment in CareShield Life is compulsory for Singaporeans born in 1980 or later, while those born earlier have the option to join. CareShield Life provides financial support to those unable to perform at least three out of six Activities of Daily Living (ADLs), such as eating, dressing, or moving around.
Read Also: CareShield Life Vs ElderShield: Understanding The Differences Between These Two Policies
While both MediShield Life and CareShield Life are national insurance schemes, they serve different purposes:
- MediShield Life helps to pay for large hospital bills and selected costly outpatient treatments.
- CareShield Life provides lifetime monthly cash payouts to support individuals with severe disabilities who require long-term care.
Premiums for both MediShield Life and CareShield Life can be paid using your MediSave account, ensuring that coverage remains accessible without requiring out-of-pocket cash payments.
# 3 Understand The Extent Of The Coverage You Have
It is not enough to know that you are covered by certain insurance policies; you need to understand how much coverage they actually provide. A good place to start is MediShield Life, since it is a mandatory health insurance scheme that all Singaporeans and Permanent Residents are enrolled in.
Coverage for MediShield Life is designed to be in line with costs in Class B2 and C wards in public hospitals. This means that if you require hospitalisation and choose to stay in a Class B2 or C ward, MediShield Life will cover most of your hospitalisation expenses, after accounting for the deductible and co-insurance components.
However, if you opt for a higher-class ward, such as a Class A or B1 ward, or seek treatment at a private hospital, the coverage provided by MediShield Life will be significantly lower, and you will have to pay a larger portion of the bill out of pocket. This is why many Singaporeans choose to supplement their MediShield Life coverage with an Integrated Shield Plan (IP) for additional protection.
A common misconception is that MediShield Life does not provide any coverage if a person is warded in A or B1 wards, or in private hospitals. This is not true.
Coverage is still provided, but payouts will appear lower in relation to the total bill, as they are based on costs pegged to Class B2 and C wards in public hospitals. This means that patients opting for higher-class wards or private hospitals will need to pay a larger portion of their medical expenses out of pocket.
For enhanced coverage in higher-class wards or private hospitals, you may wish to consider a private Integrated Shield Plan. As MediShield Life is a component of Integrated Shield Plan coverage, there is no duplication between the two. The Integrated Shield Plan builds on the coverage provided by MediShield Life, offering additional benefits and higher claim limits.
# 4 Recognise Your Own Healthcare Budget
In an ideal world, we would want to have as many health insurance policies as possible, with the best coverage available.
However, in reality, we must balance our healthcare needs with what we can afford. This is particularly important for health insurance, as we need to consider not just our affordability today but also whether we can sustain the premiums in the future.
To manage our healthcare insurance budget prudently and avoid overspending, consider the following:
Set an Insurance Healthcare Budget
Work with a trusted insurance adviser to determine the optimal level of coverage based on your financial liabilities, dependants, and lifestyle. Once this is established, compare the cost against your income to ensure that insurance expenses remain a reasonable proportion of your overall budget. If premiums are too high, review your policy with your adviser to remove unnecessary add-ons or adjust your coverage to align with your financial situation.
Consider Future Increases in Premiums
A good adviser should not only assess the cost of your insurance policies today but also anticipate future premium increases. This is particularly relevant for private Integrated Shield Plans, which tend to see steeper increases in premiums compared to MediShield Life as policyholders age. Ensuring that you can afford your plan in the long term is crucial to maintaining continuous coverage.
# 5 Balance Between Your Healthcare Needs And Other Financial Goals
It is important to remember that healthcare needs are just one aspect of financial planning. Other key financial goals, such as investing, retirement planning, and saving, should not be neglected.
Every dollar allocated to one area means less for another. As such, your financial plan should take a holistic approach, balancing all aspects of personal finance.
Start by setting clear goals for each area and determining how much you need to allocate each month to achieve them. These goals should include your savings target, retirement plan, investment strategy, and any other big-ticket expenses you are working towards. Once you have mapped this out, assess whether your monthly earnings—after accounting for regular expenses—are sufficient to meet these goals.
If the answer is “yes”, continue working towards them. If the answer is “no”, adjust your budget and goals to ensure they remain realistic and achievable. Regularly review your financial plan, especially when you receive a pay increase or experience a change in circumstances, so that you can make the necessary adjustments and stay on track.
Read Also: Singaporeans Share With Us Their Experience In Public Healthcare
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