Health insurance is widely and rightfully considered to be one of the most important forms of insurance by far, primarily because most people consider their health to be their most important asset. As a result, many different insurance options are available that cater to a range of budgets and provide different forms of coverage against the costs of healthcare, should the need arise. It can be somewhat confusing to discern the most important differences between the many available options, and to decide which is best for your needs as well as your finances.
Two of the most popular options that fall under the broad category of ‘medical aid’ are ‘hospital cash back cover’ and the more conventional ‘hospital plan’. While at first glance these may appear to be similar insurance options, the reality is quite different. The importance of understanding the available options cannot be overstated, as a lapse or insufficiency in your insurance coverage can leave you in a financially difficult situation should you or a family member be injured or taken ill. In this circumstance, the last thing you want is for money worries to compound the stress you will no doubt already be under.
Let’s start by looking into hospital cash back cover and the benefits it provides. As the term would suggest, this kind of scheme generally pays out a lump sum to the policyholder in the event of hospitalisation. Usually, the person covered by the policy will need to have spent a predetermined amount of time in hospital before this payout will kick in. The insurance company will most often pay out a set amount of money per day of hospitalisation, for a limited period of time.
The amount of money received by the policyholder will vary depending on the specific policy, but is generally intended to cover the non-medical expenses that may arise during a hospital stay, such as those incurred by a loss of income due to the patient being unable to work. This makes this kind of coverage a welcome financial support in the event that a family breadwinner is hospitalised, making life easier for his or her family in the interim
A hospital plan, on the other hand, is designed to pay the costs of your medical care directly, without giving you any cash (unlike a hospital cash back plan, which pays money direct to the policyholder). Most hospital plans will not cover your hospital bill entirely, but will contribute a percentage of the costs, or up to a set limit. The bills covered by hospital plans are generally limited to those directly related to your hospitalisation, and often exclude things like any medicine or follow-up care you may need thereafter – things usually covered by broader medical aid. The main advantage of hospital plans over this kind of medical aid is that they are of course cheaper.
The above outlines of hospital cash back cover and hospital plans respectively can be boiled down to a simple comparison: with hospital cash back cover, you receive money directly to assist with a loss of income, while with hospital plans, a portion of your hospital bills are covered by the insurance company. Each of these types of schemes has different pros and cons that may affect individuals in different ways.
One of the major benefits of having a hospital cash back plan is that the effect of a loss of income as a result of your hospitalisation can be minimised. This means that your family’s lives can continue more or less as normal, without having to cut back on expenses due to financial constraints. This takes a considerable burden off family members who will no doubt be concerned about the hospitalization of a loved one.
Premiums for hospital cash back plans are also designed to be more affordable than conventional medical aid, and your whole family can be enlisted under the same or similar schemes. A wide age range for application also makes this an appealing choice for those who want their family to be protected in the event of serious illness or injury, but need to remain budget-conscious.
Another significant advantage of hospital cash back plans is that, in most cases, a percentage of your premiums will be paid back to you in the event that you do not make a claim over a set period of time. Most schemes of this kind offer something along the lines of a 15-20% cash back payout if no claims are made over a 3-5 year period. Some will even pay cash back after a few years regardless of whether any claims are made.
Perhaps the main drawback to hospital cash back plans is that they are essentially intended to be a supplementary feature to a broader medical aid. As we have already seen, the money you receive in payouts is intended to cover your loss of income, but is unlikely to be sufficient to cover this in addition to your medical bills. For this reason, it is highly recommended that a medical aid scheme or hospital plan be considered as a priority before entering into a hospital cash back plan.
Hospital plans, on the other hand, come in two forms: they can either be included in a wider medical aid scheme or be entered into as separate insurance policies. This kind of insurance can be invaluable in the event of costly hospital bills, such as those incurred by surgery, long-term care, or other situations where costs are high. By providing coverage of these costs, hospital plans offer an advantage that hospital cash back plans cannot.
While comprehensive medical aid is desirable for absolute peace of mind, hospital plans can be more cost-effective for the young and healthy who want to be covered in the event of a serious and unforeseen accident or illness, but otherwise do not anticipate any serious medical costs in their everyday lives. Hospital plans allow access to the best private hospital care without the higher premiums of broader medical schemes, making them an attractive option for many people.
However, this same advantage does of course bring with it the disadvantage of not covering any costs that may be incurred outside of a hospital. This means that a chronic condition, for instance, which does not require long-term hospitalisation but does mean outside consultation or medication is necessary, will not be covered by a hospital plan. As these costs can be quite significant on their own, this is something to consider when looking at health insurance options.
In addition, the age limits set on both hospital cash back plans and standard hospital plans, as well as the likely need that the elderly may have for more comprehensive care, mean that these plans are not generally suitable for or even available to those over the age of 60. For such people, medical aid schemes are often the best option to ensure that your health is protected.
The above comparison of hospital cash back plans and hospital plans demonstrates that each has its own distinct advantages and disadvantages, which will naturally apply differently to various types of people. It is also important to consider than some medical aid schemes include some or all of the benefits of each, albeit at a higher premium. In choosing between your health insurance options, be sure to consider carefully your needs and limitations to ensure that you obtain the coverage and security you need for yourself and your family.