Self Insurance

Nobody will argue the fact that the cost of medical aid plans can be prohibitive. Many people simply cannot afford this type of cover, and although hospital plans are more affordable, they do not make provision for any day-to-day medical expenses.

Medical treatment, especially major surgical procedures, can be extremely expensive, and very few people have the cash that is required to cover such expenses. A major illness or an accident can financially cripple a family, and it is vital to make some form of provision for medical emergencies. One option is to opt for self-insurance.

What is self-insurance?

Choosing self-insurance simply means that an individual decides to save or invest money to make provision for medical emergencies. This is a risky option because the individual concerned has no recourse if an untimely emergency occurs while the fund that is supposed to cover such occurrences is not big enough to pay for the treatment. Here are a few points to consider before opting for this solution:

• For this option to be viable, a portion of your income needs to be invested every month. The amount should roughly be the same as the cost of a medical aid plan.
• Self-insurance is only a viable option if you start saving and investing from a very early age while still healthy.
• Self-insurance requires a high degree of financial discipline, and the money in the fund should never be used for purposes other than medical expenses.
• It requires a great deal of knowledge about the stock markets and investment practices. Experts advise that it is best to spread the risk by building up a portfolio that consists of several investment channels.
• It may be a good idea to at least take out a hospital plan in the early years. When the fund has reached maturity, the hospital plan can be canceled. In this way, provision can be made for calamities when least expected.
• Many people that opt for self-insurance purchase additional medical insurance from one of the larger insurance companies. These policies pay policyholders a cash amount for every day spent in the hospital. Such a policy can serve as an additional source of cash during medical emergencies that require hospitalization.

What are the advantages of self-insurance?

• Monthly contributions to a medical aid plan are not refundable, although some schemes have cash reward schemes for members who do not claim. With self-insurance, the money is never lost. The investment simply keeps growing, and it is even possible to earn money from it.
• All medical plans have terms and conditions, and there are limits to the cover provided. Many members of medical schemes still have to pay substantial amounts from their own pockets. With self-insurance, there are no limits and there are no exclusions. Decisions regarding the management of medical costs are all made by the investor himself.

What are the main risks?

• No investment, however carefully made and however solid a prospect, can be guaranteed. There is always the risk with self-insurance that shares will lose value and that tumult in the financial markets will cause the value of the investment to diminish. It is even possible to lose everything.
• A medical emergency may occur that is of such magnitude that the fund is not able to cover the cost. That is why it is advisable to purchase additional medical self-insurance. © Medical Aid Plan

Your medical aid quote will include options to suit your pocket. Please ensure that the cover you select is exactly what you need and that you understand exactly what insurance you are buying. Do not hesitate to ask questions about the medical aid or hospital cover you choose.