Avoid over-insurance for medical bills

Dear Mr Tan,

I am insured under a Shield plan. But my agent said that the coverage is not sufficient. Should I buy another medical insurance plan to cover the gaps?

REPLY:

It is better to select one medical policy to provide the coverage that you need. If there are gaps, you can pay for the balance out of pocket. You need insurance only to cover the big bills. There is no need to cover every dollar of the bill.

If you buy two insurance policies to cover your medical bill, you are paying twice the premium. But you do not enjoy the full coverage from the two policies.

You can only claim under the second policy for what is not paid under the first policy, even though you have paid the full premium for the second policy.

For every $100 of premium, the average claim payout is about $70. If your policy pays for only part of what is covered (due to over-insurance), you may be getting (say) only $30 worth of claim. This is not worth buying.

This restriction against over-insurance applies for medical insurance where you can only claim for what you have spent. It does not apply in the case of life insurance, where you can claim in full under several insurance policies.