How much is enough?

Medical aid (including insurance products) contributions need to form part of our overall financial planning. Every year these products are adjusted slightly – both in how much they cost in monthly premiums and in what they cover. These increasing costs can feel burdensome and unnecessary to those who seldom use their medical cover, but they remain a crucial part of our financial planning.

Unforeseen medical expenses can completely decimate our savings and future opportunities if we don’t have some form of cover in place.

The tricky question – for EVERYONE – is how much cover is enough?

Often we think of really hard scenarios, like a freak accident or the life-changing diagnosis of cancer or another dread disease. But the reality is that there are so many scenarios and we can’t possibly plan for them all. And, if we have a run of good health, we might feel like we have the space to reduce our medical cover – especially given that budgets are being stretched tighter than ever and private medical care doesn’t come cheap.

Everyone’s situation is unique, so it’s never 100% appropriate to base financial planning on averages, but a good understanding of trends is helpful in guiding us to making prudent decisions when there are so many variables to sway us.

In a late 2018 article for New24, Jillian Larkan (then head of health consulting at GTC), advised that their benchmark is around 10% of the household income, for the whole family. This is less if there is higher confidence in the state-provided medical care.

It’s quite easy to understand how this will become a grudge-purchase for those who reach the end of a tax year having had zero claims on their medical aid. For those who have benefitted, it’s a no-brainer.

The general rule-of-thumb is that for those members who are younger, healthier and have no dependents, a lighter medical plan is sufficient. It’s not all-encompassing but the average risk for that member is considerably lower. For members who are older, have dependents and may have developed underlying health conditions, a more comprehensive (and more expensive) medical plan would be most likely.

Inside of a good financial plan, a contingency should be made for possible short-falls in all scenarios. It’s wise to remember that in every scenario there will be unforeseen outcomes, if we think we are ‘completely’ covered for ‘any eventuality’ we are setting ourselves up for frustration and disappointment.

We are now living in a world where even the best government or state-provided medical care is not the first choice for most people. Having access to private medical care gives us increased autonomy in our decisions when a health tragedy has already placed strain and stress on our lives.

You may not need to spend as much as 10%, or you may need to be budgeting closer to 15%. Depending on your lifestyle and your current responsibilities, your personal financial plan needs to have a medical cover review every year around November as most providers only allow for changes and upgrades once a year.

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