As we get older we are mindful that we could be afflicted at any time with one of the many conditions that insurers categorise as ‘critical illnesses’. Although the list of qualifying conditions runs into several dozen the most common are the more familiar ones of heart disease, stroke and cancer.
And it’s not just older folks that need to worry about it. Insurance industry statistics have shown that one in three westerners will suffer from a critical illness before the age of 65. Even more staggering is a figure issued very recently by one of the largest insurers that in one of their regions, the Middle East, the average age of customers claiming for critical illness last year was 48 and the average age for death claims was 50. The majority of claimants were under the age of 60 and with young families to support. Figures were not provided for Asia but the chances are they are not far off.
You could say these are the lucky ones in that they had the foresight to take out insurance. But insurance does not come cheap and most people opt out or have insufficient cover due to other priorities. But how many of the uninsured or underinsured have expensive houses or cars? One problem is that these items are very visible and we bow to social pressures to ‘keep up with the Joneses’. The neighbours can see an expensive house and car but they do not see the costly insurance policies of prudent individuals. Yet those policies can make the difference between retaining your assets or losing them.
When is the best time to take out life or critical illness insurance?
A cryptic answer is before you discover you have a problem! I say this as I have known several cases where I have been asked to obtain quotes out of the blue. Although it does happen people don’t usually wake up and say ‘I think I’ll take out some life insurance today’. In one case an enquirer suffered a stroke and another was diagnosed with cancer. Neither got to complete an insurance application. Both survived but of course they were no longer acceptable to the insurers. Incidentally, a claim can be refused by an insurer if an undeclared pre-existing condition exists, even if the customer is unaware of it. A claim submitted shortly after a policy is taken out is certain to be thoroughly investigated.
Millennials at risk!
So-called Millennials are unlikely to take out insurance unless:
1) the wording of the sales pitch contains less than 140 characters and has a couple of emogis,
2) the premiums are rock bottom and
3) the application can be completed via a smartphone in less than two minutes.
I am exaggerating of course but it is a fact that neither insurance nor saving is high on the list of priorities for Millennials. Meaning that this particular generation could face big problems in later years. The social safety net that has been provided to westerners for generations is likely to be a very limited one in the future as governments struggle to support ever-aging populations.
The irony is that life and critical illness insurance is inexpensive if you are still young and in good health and the policy will still be valid should your condition change for the worse later on. If you are still hesitating when you see the cost of cover, keep in mind that when (or if) you reach your next birthday the premium will rise again!
What about medical insurance?
In Bali, expats are generally well covered. People can more easily relate to the chances of a serious illness or motorbike accident because they will know so many people who have suffered either or both! Medical insurance differs from critical illness insurance as the latter applies only to specific major illnesses and the payout is a specific sum.
There is one situation where conventional international medical insurance may not be appropriate. The situation is called ‘aging’, an irreversible condition which will eventually affect all expats in Bali! Premiums become prohibitively expensive as the years roll by. But what are the alternatives?
If you can get local insurance you can forget your medivac to Singapore but at least you will get treatment in a local hospital and it must be admitted that local care has improved by leaps and bounds in the last couple of decades.
Another alternative is to anticipate stopping premiums well in advance and build up a ‘medical fund’ of your own to be tapped into only when needed for medical care. Easier said than done I know, but any means of providing some relief when needed is worth the effort.
What else needs protecting?
If you have valuable assets such as a house and a car it makes sense to cover them also against a range of calamities. Bali in particular has a habit of providing all manner of surprises, both natural and man-made.
At the end of the day, you cannot cover every eventuality in life but certain things you can and must cover. Affordability is always a challenge as it is when considering savings and pensions. An ideal level of protection as well as saving for the future will mean a reduction in money available to spend today. Invariably it will come down to determining priorities and making compromises. But that is far better than just drifting along hoping the future will take care of itself. History has shown it will not!
Colin Bloodworth, Chartered Member of the Chartered Institute for Securities and Investment (UK), has spent over 20 years in Indonesia. He is based in Jakarta but visits Bali regularly. If you have any questions on this article or related topics you can contact him at firstname.lastname@example.org or +62 21 2598 5087.
You can read all past articles of Money Matters at www.BaliAdvertiser.biz
Copyright © 2018 Colin Bloodworth