Insure or Self-Insure?

The decision as to whether one gets insured, or self-insures, is a question that all expats in Thailand need to ask themselves. The following article will focus on the subject of health insurance, but it’s important to remember that the above conundrum applies to all other forms of insurance also. This includes life insurance, property and contents insurance and even liability insurance. Know the importance whether to Insure or Self-Insure.

Before delving into this debate it’s important to take a step back and examine what insurance actually is. Insurance in essence is the process of passing risks over to an insurance company in return for a premium you pay. An agreement is formed whereby the insurance company agrees to cover the costs should an event occur which is covered under the policy agreement. Insurance companies have many customers all of whom contribute to what is known as a ‘pool’. This is the accumulated premiums of many customers out of which claims are paid. Insurance companies make money by setting their premiums to ensure that claims costs are met and that there is a surplus of cash left over. This is not a simple calculation as if they set the premium levels too high then they become overpriced and uncompetitive in a market which is globally highly competitive. If on the other hand they set premiums too low then they run the risk of losing money if claims exceed premiums received. This is a balancing act controlled by actuaries and underwriters which while complicated, revolves around the simple concept of risk.

The principle of risk applies to the individual in the above question. Are the risks you face living in Thailand small enough that you can afford to cover costs of losses if they occur? Using health as an example, your risk appetite will depend on a number of factors:

1. Your age – the older you are the more likely you are to encounter health issues.
2. Family history- If there is a family history of certain illnesses, such as cancer, then the likelihood of you getting this illness increases.
3. Your lifestyle – If you lead an unhealthy lifestyle then you are increasing your risk of illness.
4. Your financial standing – If you have a high net worth then you can cover the costs of illness from your own funds.

As you will see from the above, a person’s risk appetite will vary on a case to case basis. However even if one believes they have a low chance of getting ill then it’s important to remember that they could still get ill. Therefore point 4 really is the key to determining whether you insure or self-insure whilst in Thailand. If you can’t personally cover the costs of falling sick then it’s crucial you get insurance in place to cover the worst case scenario. If you are fortunate enough to have a high level of savings then are you willing to use these funds if you are sick? Do you have cash in place to cover the worst case scenario? The chances are that even high net worth people will be happy to offset the risk of losing large sums of money should they get sick.

The answer to the above question might not be so clear cut as to yes or no. A good tactic when looking at insurance is to ask yourself what costs could you afford to meet should you get seriously ill. After establishing this, then you can look for a product which covers you after a certain point. For example if somebody feels they can afford to cover 300,000 THB worth of medical costs, but would struggle should costs exceed this, then the best approach for them would be to buy a product with a 300,000 THB deductible. This will lower the premium compared to a nil deductible and will provide you with the peace of mind that should costs exceed 300,000THB, then you will be covered up to the limits of the product you are purchasing.

In conclusion, one’s risk appetite will be a personal thing. However, even for the wealthiest people, insurance provides an opportunity to offset risk in return for paying a premium. Not having insurance will leave you in a position where you can either not afford to pay the costs, or you have to use your personal wealth to cover the bills. If you go your entire life having paid insurance premiums and have never had to make a claim, then count yourself as being lucky. But at least you know that you were/are not putting you and your family's wellbeing and financial security at risk.