Our health is very precious to us. At the same time, our health is so vulnerable and for a big part out of our control. How do you deal with that liability? Well, I am willing to pay now to have access in the future to health insurance
Both my wife and I are employees and have a great perk: hospital insurance for accidents and sickness. This comes on top of the Belgian social security.
What does that mean: It means that we reduce to almost zero the costs associated with a hospitalisation. That is nice. Please note that I prefer NEVER NEVER EVER having to use this insurance.
So, while working, we are financially protected.
What when we stop working?
The Belgian law (wet Verwilghen) obliges health insurers to make a proposal to someone that leaves his job.
Based on the number of working years, there is a medical question list/ checkup (less than 2 years) or not (more than 2 years). Avoiding paperwork and medical checks is a plus in my book.
The premium will be based on the age you have at that time. In general, the older that you are when you start, the more you have to pay. That makes sense, as it is more likely that older people will get sick, so you need to pay more as you are of a higher risk. In the end, insurance is about statistics…
Last time that I changed job, I got a quote from the insurance company to continue the same (or similar) insurance. I decided not to take it, as I was also insured under the insurance of my wife her work
It got me thinking
Hospitalisation insurance is a must have for me to mitigate the risk of health related costs as you get older. Being part of the FIRE community, I foresee to stop working early, hence, I need to take care of my own insurance.
So, I went out and looked for some solutions. And when talking about this in the BENL Leuven meetup, I got the hint for a blog post. Here it is.
And it is good that I wrote this, as I discovered my product is slightly different than I tought.
There are different possibilities that I found in my recent research
1- An insurance that locks in your age
Imagine your employer offers you an hospitalisation plan or you have one for a longer period. You can then pay each year a premium and then when you stop working, you can activate the hospital insurance at a premium of the age that you subscribed the “lock in” insurance. This should be at a lower premium than when you go and buy the hospitalisation out right. You are then obliged to take the insurance of the “lock in” insurance
you have a low premium for life when you subscribe the “lock in” insurance at a young age.
When you do not like the insurance plan of the insurance company, your premiums are lost.
You need to pay the premiums each year. One year of missed premium means a reset to the restart of the premium payment
2- Hospitalisation savings plan – pre financing
This is a type of product where the insurer accepts you on your current health. You start to contribute in an hospitalisation saving plan. You can activate the hospitalisation insurance at any time at the price conditions of that age. Medically, you are already accepted.
And when you decide not to activate it, you can claim back the saved capital.
It goes without a saying that these plan have hefty entry fees and some management fees. Someone needs to pay for the risk that the party takes.
The premiums you paid, after fese, are yours. When you decide not to take the plan, the money stays yours (as opposed to solution 1)
the premium is calculated on your age, each year again. So, it will go up. That is where the saved money comes in: it should pay for the premium.
I have read some older articles on the hybrid solution. That would be the best of both worlds. However, I can not find any decent information
And to be honest, I was in the naive and happy assumption that we had a Hybrid form
Lock in the premium now
Save for later
Seemed to good to be true…!!!
What we have
So, as a family, we took a hospitalisation savings plan. With all the info that I have now, I do I think about it for our personal situation
The fact that medically we are accepted without conditions by an insurer is a plus for me. Imagine that on the day we FIRE, I do not like the coverage of my corporate insurer, then at least I have a plan B without medical acceptance. Having options is always a good thing.
The paid premiums, after fees are mine. No matter what
There are hefty entry fees and management fees and the saving is in a Branch 21 product. A product I do not want anymore for my portfolio
The premium of the health insurance is not locked in. I will be faced with a yearly increase of my health insurance. Do I want to overcome this, Then I would need to use the solution one, and pay a premium just for that. And these premiums are lost. Kinda like the entry fees
Use none of these products and assume that I will continue whatever corporate insurance we have when we FIRE based on the “wet Verwilgen”. It means I need no medical acceptance at that time and can not choose the insurance company other than the one my wife and I would be with at that time. The saved premiums could be invested and be added to our nest egg. The returns should be above the Branch 21 product.
Based on all info I have now, I am still happy with the product we pay for. It generates options for us on the health insurance. Being able to hedge an unknown future liability is never for free. The premiums are now paid out of our monthly expenses.
In the FIRE budget calculation, I keep the same amount to pay for the premium. This, combined with the saved money is at this moment what I foresee as budget. The future will tell.
How is this dealt with in your country?