Would you pay now for a future health insurance?

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

Background

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

Advantage

you have a low premium for life when you subscribe the “lock in” insurance at a young age.

Disadvantage

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.

Advantage

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)

Disadvantage

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.

3- Hybrid

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

Like

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

Dislike

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

Alternative

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.

 

Conclusion

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?

 

 

 

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6 thoughts on “Would you pay now for a future health insurance?

  1. You guys at least have a few options! For us it is just mandatory health insurance, with only choices in deductible and coverage. It’s bloody expensive too (albeit these premiums only cover about 25% of the overall healthcare expenses in our cheesy country per person per year) starting at around €90 per person per month (including dental). You can get benefits, but not if you have substantial wealth. It’s a big expense during FIRE for us.

    Liked by 1 person

  2. Nope. Hell I am not even paying for it now. And since neither of our work offers it we do not have any hospitalization insurance at the moment. Then again I am a guy who (even when he had insurance) checked himself out of the hospital even before the doctor came to check on me after the procedure. I felt fine and the dude was taken to damn long, let’s be honest here, they walk into your room, look at your chart for two seconds and then walk out again and you want to keep me waiting 4 hours for that?! Hell no!). For my old age I have the only child card. When I will be old and in need of expensive care I will be a millionaire… I also have no problem moving country to where health care is cheap and the sun is shining.

    Liked by 1 person

  3. Hi ATL,

    Great overview, but If I’m not mistaken the hospital insurance is only to cover the part the social security does not cover. aka a luxury insurance to cover your own limited risk.

    As with any insurance I think a critical risk/cost analysis is required. I think that’s only something that can be done on an individual level. Are you living healthy? Are there known risks or illnesses in your family?

    We have taken a hospital insurance since the first pregnancy of my wife (increased risk and planned hospital stays) And we only took the basic one from the “mutualiteiten”. But even with the 2 “planned” hospital visit’s I think the “insurance investment” was about break even.

    As example of actual health costs in our country. Our son was 2 weeks in intensive care. The total invoice was more than 14.000EUR. 13.300EUR of this was covered by the standard social security. About 700EUR was own risk of wich we got a coverage of 660EUR from our hospital insurance.

    Also good to know is that in Belgium your own risk is limited per year by the “Maximumfactuur (MAF)” which is depending on your income between 468 and 1.872EUR per year per family. Not that much compared to the insurance fee if you ask me…

    These findings lead me to question value of the added hospital insurance. I think we will discontinue them after our last child and reconsider once again once we are +45 years. (Again higher risk)

    A bigger issue is once you’re FIRE (and willingly not working) you’re not entitled anymore for our social security. Note that the hospital insurance will not cover the part the social security usually covers.
    There are ways around this for example being registered as self-employed with a minimum social security fee of 721EUR per quarter or 2.887EUR per year. Or there are other ways such as being registered as unemployed or even as a monk. Still have to find out the bits and bolts of this one.

    Liked by 1 person

    1. This is an interesting comment. I need to look into the MAF. I always assumed it did not apply to me.

      In order to stay in the system, I indeed consider self employment at some moment in time. The monk part is not my thing 😉 Keep us posted

      Liked by 1 person

  4. I pay the minimum mandatory.
    But since I am 40 years old, I am thinking to find an extra health insurance with a package for hospitalisation and dental …so I re read your article several time.

    Like

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