This post is on important things to consider before switching your medical insurance plan.
Partial of this sharing is based on my experience when assisting my husband in switching his medical insurance plan in 2013.
To be honest, during that time we didn’t do much research. And we only compare certain important criteria such as the coverage, benefits and additional riders. We were not aware of other important insurance terms such as the Contestability Period and non-inclusive claims.
And now that I am currently taking a break from full-time employment, I have time to read up and explore insurance matters, especially medical and health insurance.
So, I decided to come out with a post on considerations before switching medical insurance plans as a guideline for those who wish to do so.
Table of Contents
- 7 important considerations before switching medical insurance plan
- Suggestions instead of switching medical insurance plan
- Final thoughts
7 important considerations before switching medical insurance plan
Nowadays, more and more medical insurance plans are made available to the public. We not only can buy medical insurance from the insurer’s office or through insurance agents but also online.
When we are spoilt with too many choices, it is tempting to change our medical insurance plan. Especially if the new plan seems to have better benefits with a cheaper premium.
Or perhaps someone closed (a relative, friend, colleague) is an insurance agent now. And this someone closed keeps pestering you to switch to his or her insurance company. So, you are considering switching your medical insurance plan.
Before switching your medical insurance plan, do consider these 7 important considerations:
1. Higher premium due to an older age
Firstly, when you switch to a new insurance provider, you might need to pay a higher premium compared to your existing policy. Especially if you have been holding the old policy for years, and it is an investment-linked plan.
I believe we all know or at least heard of ‘buy insurance when you are younger because it is cheaper’. In general, the medical insurance premium is based on the age band.
So, the older your age, the higher your policy premium.
For medical coverage attached to an investment-linked policy, the premium is based on the age when you first sign up.
For example, for the same benefit and coverage, there is a huge difference in premium when you sign up at 25 years old versus 35 years old.
Unless there is a major difference in benefits and coverage, consider thoroughly before switching a medical insurance plan which you had been holding for years.
Remark: As for my husband’s case, he switched the medical insurance plan after he holds the old plan for about 20 months. So, there is not much impact.
2. Medical coverage for the existing health issue
Secondly, do consider your existing health issue (if any). Especially if the health issue only happened after your existing medical insurance policy is fully in force.
Because this existing health issue is covered by the existing provider. But, if you switch to a new provider, you will need to declare the existing health issue as your Pre-Existing condition during enrollment.
A pre-existing condition is any personal illness or health condition that was known and existed prior to the writing and signing of an insurance contract .
Investopedia
As a result of the Pre-Existing condition, the new insurance provider might:
- reject the application; or
- exclude the medical coverage for the existing illness; or
- provide loadings (additional cost) on the premium
As a result, you might need to pay a higher premium for the new medical insurance plan.
So, if you have an existing health issue, you might not want to switch your medical insurance plan.
Remark: As for my husband’s case, thankfully there was no existing medical condition. So, his new policy is not affected.
3. Waiting period before coverage
Thirdly, do take note of the waiting period imposed by the new insurer when you switch your medical coverage plan.
For example, my Prudential Pruhealth plan does not cover:
- Specified Illnesses occurring during the first 120 days of a continuous cover
- Any other causes occurring during the first 30 days of a continuous cover except for accidental injuries
In case you are wondering what is Specificied Illnesses, my policy stated the below:
- hypertension, diabetes mellitus and cardiovascular disease
- all tumours, cancers, cysts, nodules, polyps, stones of the urinary system and biliary system
- all ear, nose and throat conditions
- hernias, haemorrhoids, fistulae, hydrocele, varicocele
- endometriosis includes disease of the reproduction system
- vertebro-spinal disorders and knees conditions
Still not familiar with the above illnesses? But, at least you roughly know what kind of sickness is classified as Specified Illnesses.
Anyway, the important part is the new insurance provider will impose the waiting period again when you switch the medical insurance plan.
If you still wish to switch your medical coverage insurer, what you can do is:
- to apply for the take-over from the old policy to avoid having to go through the waiting period again
- or only cancel the old policy after the new policy waiting period is over (in most cases is 120 days)
For a better picture, it is advisable to enquire about the waiting period from your insurance agent. Or ask the insurance provider for clarification before you switch your medical insurance provider.
Remark: For my husband’s case, the new agent told us about the 120 days waiting period, but she did not share about the take-over part. So, my husband only cancels the old plan after the new plan has been in force for more than 120 days. Because of this, there were a few months when we had to pay both premiums.
4. Two-year Contestability Period
Fourthly, when you purchase a medical insurance policy, generally, there is a 2-year period of contestability. This means that within the first two years of a policy in force, the insurer can investigate and deny a claim.
After 2 years from the policy issue date, the policy will enter the Incontestability Period. This is where the policy will not be contestable and the insurer is obligated to pay the claim.
An incontestability clause is a clause in most life insurance policies that prevents the provider from voiding coverage due to a misstatement by the insured after a specific amount of time has passed. A typical incontestability clause specifies that a contract will not be voidable after two or three years due to a misstatement.
Investopedia
As a policyholder, it is always safer to be in the Incontestability Period rather than the Contestability Period. Because in case anything happened, we want the insurance company to provide coverage or pay the claims as agreed. Not questioning, investigating, delaying or denying our claims.
So, do consider the 2-year Contestability Period when you plan to switch your medical insurance provider.
Remark: As for my husband’s case, we were totally not aware of the Contestability Period of 2 years. Thank God he is now in the Incontestability Period.
5. Impact on your cash value accumulation
Your decision to change your medical insurance plan might impact your cash value accumulation too. This is mainly for medical insurance policyholder who holds an investment-linked plan, where a portion of their premium is invested in selected funds.
Terminating an existing medical insurance plan with a new investment-linked plan might not be a good idea. Because for the first few years, a larger percentage of the premium is allocated for the insurer’s sales, marketing and administration purpose.
And usually, the premium allocation is only fully invested after the 6th year.
Take an example of my PRUlink assurance account allocations rate for each premium year below:
| Year | Allocation Rate for Each Premium Year |
| Year 1 | 40.00% |
| Year 2 | 40.00% |
| Year 3 | 70.00% |
| Year 4 | 70.00% |
| Year 5 | 90.00% |
| Year 6 | 90.00% |
| Above Year 6 | 100.00% |
Thus, if you change your medical plan which is attached to an investment-linked policy after the 6th year, you are ‘resetting’ the whole process again. This means you have less premium going to your investment. And less cash value available in your policy.
Remark: As for my husband’s case, there was some impact. Even though not much but there is some cash value generated. Anyway, it is still acceptable because he only holds the old plan for 20 months.
6. The non-inclusive claim in the medical insurance plan
Next is to consider the non-inclusive claim in the new medical insurance plan.
Do check if the new medical insurance provider excludes certain claims. For example, do check if they exclude consultation, examination tests and take-home drugs for outpatient kidney dialysis treatment.
This is important because some take-home drugs can be expensive, especially for long-term care such as kidney failure.
Remark: As for my husband’s case, we were not aware of the non-inclusive claim. But, from my recent checking, both policies have quite a similar condition in the exclusions part.
7. Settle the unsolved issue
Lastly, if you want to switch insurance plans because you are unhappy with an unsolved issue with your existing insurer, do consider clearing up and settling the issue.
Don’t simply cancel the existing plan without settling unsolved issue because you might be leaving a bad record behind.
Remark: My husband did not have any unsolved issues. So, we did not have any problem when surrendering the old plan.
Suggestions instead of switching medical insurance plan
Instead of switching your medical insurance plan, perhaps you can consider the suggestions below:
1. Upgrade the existing medical insurance plan
Before deciding whether to switch your medical insurance plan, it is best to get advice from your existing insurance agent.
Tell the agent your concern and ask for advice such as the possibility to upgrade the existing plan. If you feel the agent might be biased, then contact the insurance company directly.
Alternatively, you can engage an independent financial advisor for an unbiased point of view.
2. Get additional medical insurance coverage
If you find that your existing medical coverage is not sufficient, it might be a good idea to get additional medical insurance coverage on top of your existing policy.
What I meant here is to maintain your existing medical insurance plan and get additional coverage for whichever part is insufficient or not covered.
Those who already have a comprehensive plan but wish to have additional coverage can read my sharing on standalone versus investment-linked plans. This is where I compare the features between standalone medical coverage and medical coverage attached to the investment-linked plan.
3. Change servicing insurance agent
If you want to switch your medical insurance coverage because you are unhappy with your servicing insurance agent, reach out to the insurance provider. You may try requesting to change the servicing agent.
Alternatively, you can learn to liaise directly with the insurance provider. Especially if the medical plan attached to your investment-linked policy is more than 6 years.
Final thoughts
I know it can be tempting to switch medical coverage providers. Especially now that we can easily enrol in standalone medical coverage online.
But, do consider it thoroughly before you cancel your existing medical coverage. And make sure you know your medical coverage requirements, needs and affordability before you sign a new policy.
Most importantly, do ensure there is no coverage gap if you decided to switch your medical insurance plan.
Lastly, I hope my sharing of 7 considerations before changing your medical insurance coverage is beneficial to you.
P/S: As of the time of writing, I am not an insurance agent. The above is purely based on my own experience and point of view. If you are an expert in the insurance industry, I welcome your comment and view. Feel free to share additional considerations other than the above. Let’s learn to make better financial decisions.
Image Credits
First image by Gerd Altmann from Pixabay
Second image by Rocco Stoppoloni from Pixabay
Third image by Nattanan Kanchanaprat from Pixabay
