As income grows, so do lifestyle expectations. With increasing awareness and access to various medical treatment options, it becomes more important to ensure clients can afford quality care without depleting their assets.

Q: What are some challenges young adult face when it comes to planning for health insurance?

My main target audience consists of working adults aged 25 to 35. I work with fresh graduates to kickstart their basic insurance planning, as well as young couples who are planning to start a family or planning to have children.

One of the biggest misconceptions clients often have is the belief that a hospital insurance is sufficient for long-term critical illness and early critical illness coverage.

However, as times change, so do insurance definitions and policies. And with medical advancements improving survival rates, what once seemed like adequate coverage may no longer be sufficient for clients’ needs.

Young adults, between the age of 25 and 30, often experience rapid career progression and major life milestones, such as promotions, marriage, buying a house, and also starting a family. It's vital to anticipate these changes when designing their financial plans.

Rather than the typical advisory recommendation of coverage that is between three to five times the annual income, I take a forward-looking approach to address medical inflation, lifestyle inflation, and future earning potential.

For example, if a client currently earns about $40,000 per year, the typical advisory recommendation might be CI (critical illness) and early-stage coverage equivalent to three to five times the annual income, such as $120,000 to about $200,000.

However, considering their potential career progression, they may earn substantially more over a three to five years recovery period. Additionally, if a client's income rises, the time that a sum buys becomes much more precious than initially intended.

As income grows, so do lifestyle expectations. With increasing awareness and access to various medical treatment options, it becomes more important to ensure clients can afford quality care without depleting their assets. This is a crucial element of comprehensive risk management. Therefore, I typically recommend five to eight years of income replacement for young graduates. This helps buffer against medical inflation, income potential that hasn't been fully utilized yet, and constantly tops up their coverage.

Since the premiums are much more affordable at a younger age, it also allows them to lock in competitive rates early, eliminating the accumulation of risk associated with medical costs that may already be in place.

Q: How do you help clients prepare for medical inflation?

To help clients hedge the gains on future medical inflation, I adopt a holistic financial planning approach that takes into account their long-term healthcare needs.

When planning for critical illness and early-stage coverage, I consider three key factors:

Number one, medical inflation.

Number two, career income growth potential projected over the three to five years.

(Number three), lifestyle expectations during illness and recovery.

Recently, I worked with a 25-year-old graduate who had just started her first job and was keen to plan for her future to help her fully understand risk management. I explained that critical illness and early-stage coverage is essentially about buying time for herself, giving her the freedom to choose her recovery journey, without financial worry.

I summarized this into two Ts and three Cs.

The two Ts are: Time for recovery which can range from about two to three years, or even up to five years depending on the severity of the illness and also the time to re-enter the workforce after recovery.

The three Cs: Are her choice to leave her job and fully focus on recovery, her choice of treatment plans and specialists that will take care of her, her choice to maintain her lifestyle without financial constraints.

This framework gives clients a comprehensive understanding of why proper coverage matters.

Q: How do you help clients understand the real-world impact of medical costs?

I collaborate with our private companies to organize seminars featuring healthcare professionals. During these sessions, prospects and clients learn more about various illnesses and associated costs.

I also hold cancer awareness sessions where the doctors discuss early detection treatments and their costs. This helps provide clients with a more realistic view of recovery timelines.

I use a logical and example-driven approach to help clients understand the importance of planning for medical inflation.

For instance, I asked them, “You know, if you knew an equity would increase tenfold in five years, will you invest in it today, regardless of its current cost?”

Now consider this. If you already know that medical inflation is real and will continue to rise, shouldn't we start planning for it now?

I also handled multiple clean cases throughout the past eight years, which I often share with clients to provide a real-life context. For instance, I had a client who was diagnosed with stage four lung cancer at the age of 29 years old. Each chemotherapy session cost approximately SGD 15,000 to 20,000 per session and his treatment plans exceeded SGD 300,000 over the past 1.5 years. This includes numerous scans, consultations with specialists, such as cardiologists, and also the ECG tests.

As his conditions showed limited progression over the past 1.5 years, his doctor recommended an experimental treatment offered by the National Cancer Centre Singapore. Excited about the possibility, he agreed. However, this treatment was not fully covered under the policy as it was still considered experimental and is not on the cancer drug list. So, he could only claim a part of it. The rest had to be out of pocket.

Fortunately, he purchased an SGD 300,000 critical illness sum assured at the age of 25 years old when he started working. This gave him the financial safety net to pursue treatment without worrying about the cost.

If current treatment plans are already so costly, one can only imagine how medical inflation is going to affect us negatively in the future. The truth is, we never know when a claimable event might occur. What we can do now is to plan properly while we're still in the position to do so.

Contact: MDRTeditorial@teamlewis.com

Transcript

Preparing young adults for rising insurance costs in Singapore

Author(s):

Ashley Ong