It is important for people to have health insurance in this day and age, especially in light of the pandemic and the fact that medical costs are constantly increasing.

One affordable option is a standalone medical card, which is an insurance plan that provides purely medical benefits. It is more affordable than a rider medical card, which includes critical illness coverage and an investment unit trust.

Here are some misconceptions about medical cards, and the reasons you should consider taking out private health insurance if you can.

1. Employment health benefits will suffice

Why would you need another card if you already have insurance coverage from your employer? To counter this question, here are others to consider:

• Will you be working with your current employer for life?

In other words, would you retain your benefits after you leave your company? For most, medical benefits cease immediately upon departing. So unless you can be assured of a job with decent benefits all the time, it is wise to get your own medical card.

• What benefits are offered by your corporate insurer?

There is a huge gap in the coverage offered by a personalised medical card and by corporate medical insurance. It is common for one to have more than RM1 million in annual limit with a personalised medical card – a far cry from the RM100,000 or less offered by corporate medical insurance.

2. Critical illness (CI) coverage is enough

Some people are confused between a medical card and CI coverage. A medical card is used to pay medical and hospital bills, which is a good alternative to paying with your own funds. CI coverage is used to finance the policyholder’s living expenses, as well as nursing and medical costs, which are not covered by a medical card.

CI coverage can be seen as a way of replacing the active income a person could have earned had they not been diagnosed with a critical illness. It is advisable to start with a medical card and add CI coverage progressively.

3. An investment-linked policy (ILP) is better

To be clear, a standalone medical card is more affordable, while an ILP offers a much higher annual limit and has zero co-insurance. You pay a higher premium for this policy as it consists of life insurance, CI coverage and unit trust investments.

Despite being a bundled insurance deal, the coverage amounts for death, total permanent disability and critical illness tend to be low. Shop around for a suitable medical card from different insurers and get a few quotes before deciding on one.

4. Standalone medical cards have rising premiums

True, any increase in premium is more apparent if you buy a standalone medical card, and is less obvious if embedded within an ILP because you would pay a fixed premium.

But all medical cards will rise in premiums over time. Say you are 30 years old and intend to buy an ILP. Your premium is RM200 a month, which is higher than a standalone medical card. Bear in mind the following:

• the premium is low while you are young;
• you incur costs on life insurance, CI coverage, and on your medical card;
• you pay commission to your life insurance agent;
• your insurer will invest whatever is left into your designated unit trust;
• your choice of unit trust is limited to funds managed by your life insurer.

Fast forward to age 50. You are likely to continue paying RM200 a month for your policy, despite ongoing growth in the actual premium of your medical card.

This is because the jump in life insurance, CI coverage and medical card costs are paid by the accumulated investment value from your unit trust in the ILP. And you will be required to add to your ILP’s premium if you have fully exhausted its cash value.

So remember, there is no such thing as fixed premium medical insurance. It is always going to rise due to age and medical inflation.

5. It is better to invest your money

Yes, it is good to build sustainable wealth for the long-term. But a medical card can be used as a tool to protect your finances to save you from using your own funds in the event of a medical emergency.

A financially savvy person could even earn passive income from investments and use it to pay for their life insurance, CI coverage and medical card.

This article first appeared in kclau.com.

KC Lau’s first book ‘Top Money Tips for Malaysians’ has sold thousands of copies. He launched the ‘Money Automation System’, the first online personal finance course specifically designed for Malaysians. He also co-founded many other online financial courses including the Bursa Method, Property Method, Founder Method and REIT Method.