Salary 25 million should buy health insurance?

Experts recommend prioritizing health insurance, life insurance, and then health insurance if possible.

I am 30 years old, an office worker, with a salary of about 25 million VND per month. I have bought life insurance, paying 24 million VND per year.

Recently, my broker introduced me to health insurance with benefits to pay for medical examination, hospitalization or serious accident. The fee ranges from 3.5-5 million VND per year.

I am still wondering whether to buy it or not, while I am young and in good health. Please give me some advice, experts.

Voice

A patient is showing his health insurance card to a medical facility staff. Photo: CNBC — A patient is showing his health insurance card to a medical facility staff. Photo: *CNBC*

Consultant:

Hello Thoại, your question is also a common question of many people about what types of insurance a person who generates income should own. I will answer the above question as follows.

First, it is essential to have health insurance. If you do not have it, you should buy it as soon as possible. If you do have it, it is essential to keep it, although the cost of health insurance will increase to VND972,000 per year from July 1 for the first person in the family to buy insurance. The second, third and fourth people will pay 70%, 60% and 50% of the first person's premium, respectively. The reason for the increase is that the health insurance premium is set at 4.5% of the base salary. From July 1, Vietnam will increase the base from VND1.49 million to VND1.8 million per month. Therefore, the health insurance premium will also increase.

We have a very good universal health insurance system compared to income and living costs. The only condition is a 30-day waiting period (time not covered from the date of purchase), regardless of health status, pre-existing conditions or advanced age. Compared to other countries, to enjoy similar health insurance, people will have to pay a fairly high percentage of their income. If compared to your monthly income of 25 million VND, health insurance only accounts for 0.32% of your income, while in other countries it can cost 10 times or more.

Next, understand risk and how to deal with it. Risks to property and people can be divided into two categories: frequency of occurrence and impact. From there, we can classify them into four groups.

The first group, low frequency risks, low impact. These are risks that rarely occur and if they do, they do not have major consequences, so they are acceptable. For example, you are left behind or lose something worth tens of thousands to hundreds of thousands of dong.

The second group, risks with high frequency and low impact. For example, a few times a year we get sick, mild ones will recover with rest, severe ones will require a few days in the hospital. With this type of risk, we should find ways to minimize it.

The third group, which can be called "black swan" events for each individual or family, although the probability of occurrence is very low, the level of impact is large, the consequences are extremely serious. These are risks of death, accident, serious illness with financial losses calculated as income for many years, or as much as a large part or all of the assets. The way to deal with this group of risks is to transfer the risk to a third party, that is, to buy insurance.

In addition, the fourth group is high-frequency risks with great impact. For example, we invest all our assets in a certain business or when doing dangerous jobs such as skydiving, mountain climbing... The only way to manage these risks is to avoid them.

So, after having health insurance, you should manage risks by purchasing insurance for death, accident, and critical illness events. According to the information shared, you have life insurance and are paying a premium of 24 million VND, equivalent to 8% of your annual income. Although you do not know more specifically about the insurance benefits, considering the proportion of income spent on purchasing insurance, this is a very reasonable level.

So if you have life insurance, should you buy health insurance? With an income of 25 million VND per month, if you have no dependents or only one dependent, you can save 20% of your income, about 5 million VND. Currently, you have used 2 million to buy life insurance, health insurance and have about 3 million VND left. If you buy additional health insurance, you may have to spend an additional 300,000-400,000 VND per month for this item. In return, if you have to be hospitalized, you can choose to be treated at hospitals with better bed and room conditions and higher costs.

Instead of thinking about whether or not you should buy health insurance, you can ask yourself: If you didn't pay for health insurance, what would you spend that money on and how much would it matter to you? We call this opportunity cost.

If the opportunity cost is high, meaning that the money is spent on important and meaningful things, you may consider delaying the purchase of health insurance. You are 30 years old, not yet at the age of maturity in your career (usually 35) and still have the ability to increase your income in the coming years, this amount can be postponed for 2-3 years until you have a higher income.

But if the opportunity cost is low, it means you will spend this money to invest in assets that you do not really understand or will spend more than the basic level to meet your immediate short-term needs. So should you use this money to prioritize owning more health insurance right now?

Nguyen Thu Giang

Personal Financial Planning Expert

FIDT Investment Consulting and Asset Management Company

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