Health insurance is a popular product, with around 30% of the population having cover, often through a workplace scheme. However, there is a high cancellation rate amongst retirees due to the big increase in premiums as you get older. After paying premiums for some years, often without a claim, is it wise to cancel health insurance just at the age when you are most likely to need it? Premiums are higher in old age for good reason – there is a high probability of claim. Without insurance, you will be reliant on the public health system, which may mean going on a waiting list for health care. Insurance is a means by which we pass financial risk onto someone else. As with all insurance cover, there are three questions to ask.
- What are the risks? You may have a known existing health condition which is likely to get worse or lead to other problems. There may be a family history of certain medical conditions.
- What are the consequences of those risks? There may be loss of enjoyment of life resulting from non-urgent conditions that put you on a long waiting list. If you are still working you may also suffer loss of income through illness.
- How much risk are you willing to accept? If you have significant financial assets, it may be possible for you to cover private health care costs yourself without affecting your standard of living. Alternatively, you might choose to have an excess on your policy so you share the risk with your insurer and pay a lower premium.
There are many retirees with low incomes for whom health insurance is simply not affordable. Their best strategy is to live a healthy, active lifestyle and keep savings on hand for unexpected health care costs.