Health insurance
The term 'health insurance' covets a variety of different types of contract, and it is important to pick the right type of protection for your needs, bearing in mind the varying tax considerations. Probably best known in the health insurance field are the nonprofit-making hospital provident associations. In all, probably they have about a million subscribers, and more than twice that number of people (bearing in mind family groups) are covered by this form of protection. Between them, these organisations pay out benefits of about E20 million per annum, which represents roughly half the national expenditure on private health care, apart from medicines.
The method of calculating subscriptions varies with the different schemes. One's age, and number of dependents may be taken into account, as well as the maximum amount of benefit which will be provided. Normally, some benefit is provided for a consultant's fees on an out-patient basis, and also for home nursing.
A number of commercial insurance companies are offering a different type of contract, which simply pays a set cash sum for each day for which you or a member of your family is in hospital. The benefit is not related in any way to the cost of the treatment or of a private room in a hospital or nursing home.
This kind of insurance can be offered quite cheaply, since it applies only when one is in hospital, and any period of subsequent convalescence does not qualify for benefit. Admittedly, averages,can be misleading, but, at some leading hospitals, the average stay per person is about ten days.
If the aim is to replace income when off work due to accident or sickness (which can be a particularly important requirement for anyone who counts as being self-employed or who is in practice on his own account), almost certainly the best arrangement is to take out sickness and accident insurance so that a weekly benefit will be paid by an insurance company while you are off work on doctor's orders.
Although this insurance can be quite cheap, there are certain points which need to be watched with annual policies. In the first place, weekly benefits may be limited to, say, two years, although a capital sum may be paid for permanent total disability. Apart from that, if the insurance is renewable annually, poor claims ex perience or a health breakdown of one kind or another will mean that the insurers probably will refuse to renew the insurance — or, at least, it will be on their terms. As a result, claims arising from certain causes might be exeluded altogether.
Generally, the most watertight arrangement is permanent health insurance, the principle behind which is that, as with life assurance, a level premium is payable while the policy is in force, and, irrespective of how your health may deteriorate during the period, the insurance company cannot come off risk. Benefits will be paid while you are away from work on doctor's orders for as long as your disablement continues — up to the expiry date of the policy, which can be, say, the age of sixty or sixty-five.
As in the case of life assurance, premiums for this insurance depend on age when the insurance is arranged. Naturally, there is no point in being insured for comparatively short periods off work, since this would only increase the premium dis proportionately. Often, therefore, no claim may be paid, for, say, the first month of disability. If, on the other hand, you could manage without any benefit being paid for the first three months, or six months, there should be 'a worthwhile premium reduction.
Normally, the level of benefits is fixed — and generally must not exceed 75 per cent of average earnings. Clearly, however, with inflation continuing higher benefits will be needed in the future. If, however, your health should deteriorate, you may not be able to take out extra insurance in the future.
It could be sensible, therefore, to take a policy where the benefits increase throughout — whether a claim is made or not. Naturally, this will attract an appreciably higher premium than for a contract with fixed benefits throughout. Often, the premiums will be waived while benefits are being paid.
Here again, benefits are free from tax for the first full fiscal year, thereafter being taxed as investment income.
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