Self Insurance for Medical Emergencies in South Africa
If you are young and healthy and prepared to take somewhat of a risk then self insurance is an option when looking at healthcare cover. But how does this type of insurance work?
Ideally from an early age you would put money away monthly into your own healthcare insurance account and after some time you would invest those funds.
So basically you would pay a portion of your monthly income into a bank account and from there invest the medical funds.
But what is insurance?
Insurance in this instance is cover for medical expenses such as doctor consultations, specialist visits, hospitalization and the various expenses incurred with being in hospital, cover for medication and chronic illnesses.
Typically self insurance funds would be invested into shares or equities and the risk would be spread, or invested in different ways. You could choose to invest your funds in property, into a unit trust or directly into equities.
But you need to start saving while you are young and healthy in order for your funds to accrue to better your odds.
Investing into your insurance
If you invest a sufficient amount of money into your insurance fund every single month and then invest it well, you will generally be better off as a result of following such an approach.
This is because insurance companies, be they for long or short term insurance, are typically out to make a profit for interested parties.
By self insuring, you reap the rewards of profit instead of the insurance company. This is provided the medical emergencies do not arise too soon.
Risks of insurance
There is quite a bit of risk involved with this type of insurance. There is a good chance you will come out well but there is also a chance you could come off worse. You will need to consider things like your house being burgled, your car being stolen or being involved in a crash and needing to use your saved funds to replace possessions.
Also consider the possibility of your family falling seriously ill before you have had a chance to save a sufficient sum of money. Think about your house burning down and needing the funds for that.
Although you will benefit from self insurance you could stand to lose out substantially.
As a compromise you could look at self insuring and buying a basic form of insurance such as a hospital plan which will cover you for all hospitalization requirements in cases of emergencies or dreaded illness. You could then use your saved funds for things like doctor visits and dentistry.
It would also be wise to take out car insurance with a hefty excess to avoid high premiums and look into under-insuring your house and home contents to keep those monthly payments down.
Keep in mind that you will only be paid out a portion of the value of the losses but weigh up the pros and cons of low premiums.
Whether you choose to take out insurance cover or look towards self insurance be sure that you take sensible steps towards protecting yourself against unexpected things like falling seriously ill or losing your car or home or experiencing theft.