How Should We Plan for Our Medical Insurance?
Is a Higher Medical Limit Always Better?
When we first learn about financial planning, one of the first insurance policies often recommended is medical or health insurance. It’s our first line of defense against unexpected medical costs which can be very expensive, especially during serious illnesses or accidents.
But many people wonder:
“Should I just buy the highest medical limit I can afford?”
The answer is: Not always. Instead, we need to plan strategically and consider the time value of money (TVM) when deciding how much coverage we need.
Understanding Time Value of Money (TVM) in Insurance Planning
The time value of money is a principle we learn in investment classes:
A dollar today is worth more than a dollar tomorrow.
Because money can grow over time through investment returns, inflation erodes its value, and future costs rise.
Let’s apply this to medical insurance:
Example:
Suppose you are 30 years old today and plan to retire at 60.
You estimate that the average cost of a major surgery today is RM50,000.
Medical inflation in Malaysia averages about 8% per year.
Using the future value formula:
Future Cost= Present Cost × (1+Inflation Rate) ^Years
Future Cost= Present Cost× (1+Inflation Rate) ^Years
Future Cost= 50,000 × (1+0.08) ^30≈50,000×10.06 = RM503,000
Future Cost= 50,000 × (1+0.08) ^30≈50,000×10.06 = RM503,000
So, by the time you are 60, the same surgery could cost about RM500,000!
This shows why a RM100,000 annual limit might look enough today, but may be far from enough decades later.
Instead of buying the highest limit you can find right now, you can plan a progressive upgrade strategy:
- Start with a reasonable medical plan that fits your current budget.
- Review and increase your medical limit gradually as your income grows, keeping up with medical cost inflation.
This way, you balance between current affordability and future protection.
If Budget is Limited, What’s the Right Insurance Sequence?
Insurance planning should always start from protecting your health and income, then move on to covering specific illnesses and finally protecting dependents.
How to Plan Your Medical Insurance Step by Step
When planning your medical insurance, don’t just look at the highest annual limit.
Instead, build your protection step by step according to your financial priorities and the time value of money.
Here’s a simple checklist you can follow:
- Start with Hospitalisation Coverage
This is your first shield. It covers medical treatments, surgeries, and hospital stays so a sudden illness won’t drain your savings. - Add Income Protection
Once basic medical coverage is in place, consider disability income insurance. This protects your income if you’re unable to work due to illness or injury. - Include Critical Illness and Cancer Coverage
These plans pay a lump sum if you are diagnosed with major illnesses like stroke, heart attack, or cancer, giving you financial support during recovery. - Add Personal Accident Coverage
This protects against unexpected accidents that can cause injury, disability, or death. - Secure Life Insurance (if you have dependents)
This ensures your family is financially protected if something happens to you.
As your income grows over the years, review and increase your medical limit gradually to keep up with medical inflation.
This approach balances affordability now with stronger protection later without overburdening your current budget.
Don’t just chase the highest medical limit.
Use the time value of money to estimate your future medical costs, and plan your coverage to grow gradually over time.
Follow the right protection sequence to make the most of your budget, starting with medical insurance as your first shield, then expanding to income protection, critical illness, and other coverages as your needs grow.
By planning wisely, you will build a strong insurance foundation that protects both your health and your wealth today and in the future.
Your Health Is Your Most Valuable Asset
When it comes to financial planning, many people first think about saving, investing, or planning for retirement.
But in reality, health protection is the foundation of every financial plan.
A sudden illness or unexpected accident can not only disrupt your life but also quickly erode the wealth you have worked hard to build. That’s why having solid medical protection is an essential part of any financial strategy.
Insurance is not just about payouts, it is about ensuring that during difficult times, your family and your quality of life remain secure.
Take a moment today to review your current medical coverage to make sure it meets your potential healthcare and living needs.
And if you are unsure where to start, I would be happy to offer you a complimentary one-on-one first consultation to help you address your main concerns about insurance planning and design a protection plan that grows with you.
If you want to build a complete financial roadmap, be sure to explore my other personal financial planning articles, they will guide you step by step from protection and savings to investments and retirement, helping you create the life you envision.
