Sunday 24th October, 2004


Planning for health care

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Money Matters with Raziah Ahmed

It is said that “money is the root of all evil.” But that is difficult to accept in today’s world, since we live in a society in which we have to purchase almost everything we need in order to “provision the household,” to borrow from Aristotle.

In fact, more often than not, the need for money ranks right up there with our need for oxygen. How we use the money to satisfy our needs is the crux of the matter.

Last week, we began to look at the outflow of cash from our pay slips to pay for group life and health insurance. These are insurance plans that form part of the employees’ benefits in the entire compensation package.

We had also made the point that people change at least a few jobs in their lifetime, and that when one leaves a job, one leaves the employees’ benefits package behind, and thus will be seeking to start anew some other programme of group life and health plans.

Many people make the mistake of counting group insurance as their own, but group insurance is one-year, TERM insurance, that is only good for the time that you are employed with the organisation which provides the coverage.

We live in an environment where lifetime employment is out the door, and contract work appears to be the order of the day.

This makes it even more crucial to invest some premium dollars in plans that belong to you, as opposed to plans that belong to the group employer.

Insurance providers will soon have to develop innovative group life and health products that are suited to groups of professionals who work on contract, since contract work, commonly, will not include employee benefits such as group life and health plans.

As yet, individual comprehensive health plans are up-market and expensive purchases. But major illness coverage is affordable.

The immense irony is that most young people scorn the individual purchase of major medical insurance cover, but the middle age, “most at risk” persons rush for this type of insurance protection.

The older you are, the more prohibitive the pricing, because the risk gets greater, the older you grow.

The ideal time to purchase individual major medical insurance is in your 20s and early 30s, when you get your first job.

The premiums are small, and those small premiums will continue to be small throughout life, up until age 70, when the average major medical cover expires.

Your cash outflow then, for medical coverage, should include some protection that belongs to you as an individual, so that it travels with you wherever you may go in the global workspace which we now inhabit.

Individual health coverage is permanent insurance; group health cover is term coverage. It would be prudent to invest some percentage of your earnings in your health.

Years ago, I met Dr Marius Barnard, who had worked with his brother, Dr Christian Barnard, on the first heart transplant team in South Africa in the 1960s.

Dr Barnard made some profound remarks. He said: “Modern medicine will keep us doctors, we can replace your kidney, but we will completely remove your savings.”

The onus, therefore, is for us to prepare for the contingency of major organ transplant, cancer, Alzheimer’s, blindness or stroke, in such a way that we have our stream of income that will not be disrupted, when according to statistics, 80 per cent of us will incur major medical bills.

—Continued next week.

• Raziah Ahmed is a registered financial consultant.




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