Should You Avoid Purchasing "One Million Medical Insurance"?


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Medical insurance has long held the spotlight within the realm of commercial insurance, offering affordable premiums for valuable coverage. However, a new star emerged in the insurance market around 2016, catching the attention of many: the million medical insurance. As the name suggests, this insurance boasts coverage up to one million dollars, and its scope of reimbursement extends beyond the realm of social security. Prior to its advent, typical medical insurance coverage rarely exceeded tens of thousands of dollars. What has ignited the popularity of million medical insurance? Its allure lies in its appealing attributes. The hallmark features of million medical insurance are its low premiums and high coverage amount. For instance, a 30-year-old adult can obtain coverage for slightly over 300 dollars annually, while a middle-aged individual at 50 might pay around 1,000 dollars for a reimbursement cap of 2 million dollars. The leverage that emerges from these calculations is undeniably alluring. Furthermore, million medical insurance is sold as a standalone policy, marking its second unique feature. Historically, and still today for some companies, medical insurance was offered as an add-on to main policies, often attached to critical illness or life insurance. This independent sale strategy precisely addresses a consumer pain point.

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However, let's delve into the drawbacks of million medical insurance. First and foremost, there's a deductible of 10,000 dollars. This deductible effectively keeps the risk level of million medical insurance exceedingly low and simultaneously aids insurance companies in averting substantial risks. National Health Commission data supports this observation, revealing that the average hospitalization cost in a tertiary hospital was 13,313.3 dollars in 2018, increasing slightly to 13,670 dollars in 2019. This hospitalization cost pertains to expenses prior to social security reimbursement. Therefore, when hospitalization risks arise, the likelihood of successfully claiming through million medical insurance is diminished. Additionally, insurance renewal stability is poor. Unlike many long-term serious disease and life insurance policies, medical insurance is offered on a yearly basis. Why is this the case? The reason lies in the availability of actuarial data regarding age-specific mortality rates and disease incidence rates, which insurers utilize to price life and critical illness policies. The claim settlement condition for medical insurance mandates hospitalization, whether it be for illnesses or accidents. Furthermore, medical insurance operates on a reimbursement model, returning the actual medical treatment costs that fall within the reimbursement limit. This dynamic poses significant challenges for insurers' actuaries. They must consider current medical cost levels to avoid excessively high premiums that could undermine market competitiveness, all while factoring in reasonable future medical inflation rates to avoid setting themselves up for issues down the road. This challenge intensifies due to unpredictable factors like potential surges in medical costs from breakthroughs in drug development or medical technology. Consequently, medical insurance involves greater actuarial complexity compared to life insurance or serious disease insurance. This complexity contributes to medical insurance's short-term nature, requiring annual renewal.

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In summation, middle and high-end medical insurance serves as a tool for narrowing the wealth gap between average middle-class families and affluent ones. While human life is invaluable, medical expenses hold a tangible cost. We exchange valuable insurance for the priceless opportunities it offers for ourselves and our loved ones. When it comes to medical insurance, it's prudent to invest in the most comprehensive coverage that aligns with our financial capacities.