40 Million Subscribers to the 'Second Health Insurance'... They Said Never to Change It [Practical Financial Strategies]

No Duplicate Coverage for Actual Expense Insurance
1st Generation Actual Expense Insurance is Good, but
4th Generation is Reasonable if Hospital Visits are Few
Use Suspension System When Individual and Group Actual Expense Insurance Overlap

Indemnity health insurance is called the "second national health insurance," with about 40 million people enrolled. Many young workers who have just started receiving their salaries either inherit indemnity insurance that their parents had previously purchased or sign up for new policies. Sometimes, they end up regretting impulsively joining due to recommendations from acquaintances or persuasive sales agents. Here are some essential tips on indemnity insurance enrollment that young workers should know.

Choose Only the Lowest Premium for Indemnity Insurance

Indemnity insurance compensates for actual medical expenses incurred at medical institutions for disease and injury treatment. It covers inpatient and outpatient treatment costs as well as medication expenses paid at pharmacies. It also covers some non-reimbursable treatments not covered by the National Health Insurance.

Indemnity insurance does not allow for duplicate compensation. This means that even if you have two indemnity insurance policies, you cannot receive double the insurance payout. However, indemnity insurance can be combined with fixed-amount insurances such as cancer insurance or accident insurance. Fixed-amount insurance pays a predetermined sum upon diagnosis or surgery for specific diseases or injuries, regardless of medical expenses. If indemnity insurance includes coverage for diagnosis fees or surgery fees, additional compensation is possible. For example, if indemnity insurance covers 200,000 KRW for burn diagnosis and 500,000 KRW for burn surgery, you can receive an additional 700,000 KRW on top of the treatment costs covered by indemnity insurance.

There is no difference in coverage scope among insurance companies for indemnity insurance because products must comply with the standard terms set by the Financial Supervisory Service. It is most reasonable to select the product with the lowest premium on the insurance comparison site "Boheom Damoa," operated by the General Insurance Association. If you have a medical history, your application for indemnity insurance may be rejected depending on your health condition. In such cases, indemnity insurance for those with pre-existing conditions can be an alternative.

Is First-Generation Indemnity Insurance Really All-Purpose?

Indemnity insurance is divided into first, second, third, and fourth generations based on the enrollment period. Each generation differs in coverage limits, guarantees, renewal cycles, and co-payment ratios. It is often said that the first generation is the best and that you should never switch even if a sales agent contacts you to change your insurance. But is this really true?

Except for life insurance company products, first-generation indemnity insurance has no co-payment, whereas second to fourth generations have co-payments ranging from 10% to 30%. The first generation covers non-reimbursable treatments such as manual therapy and injection fees without annual limits or frequency restrictions. The same applies to oriental medicine (inpatient) and dental treatment (injury). The maturity age is 80 or 100 years, and the renewal cycle is 3 or 5 years, which is longer than other generations with different maturity and renewal cycles.

However, the first generation also has drawbacks. It has the highest premiums compared to the second to fourth generations. Treatments for anus, skin, dementia, psychiatry, infertility, and obesity are not covered. In the fourth generation, if these items are covered by reimbursement, partial or full compensation is possible. Because the first generation has a long renewal cycle, premiums can more than double at renewal. People in their 50s often experience sharp premium increases.

Ultimately, whether to maintain first-generation indemnity insurance depends on your age, medical history, economic status, and hospital usage tendencies. If you frequently receive non-reimbursable treatments for mild illnesses, maintaining the first generation is advisable; otherwise, the more affordable fourth generation may be better. Since July, the fourth generation has implemented a differentiated premium system for non-reimbursable indemnity insurance, offering discounts if the insured has little or no non-reimbursable claims in the year before renewal.

Avoid Duplicate Enrollment in Individual and Group Indemnity Insurance

Young workers should check whether their company provides group indemnity insurance upon joining. Since indemnity insurance does not allow duplicate compensation whether individual or group, it is best to carefully compare coverage and choose one. Generally, individual indemnity insurance offers broader coverage than group indemnity insurance.

If you determine that the group indemnity insurance paid by the company is better, you can use the "Indemnity Insurance Suspension System." Implemented since 2018, this system allows you to suspend your individual indemnity insurance and resume it when needed, such as after retirement. However, some companies exclude outpatient treatment coverage for employees who previously had individual indemnity insurance, so if you plan to suspend your individual indemnity insurance, request the company to include outpatient treatment coverage.

If the group indemnity insurance provided by the company is insufficient, you can selectively suspend only the overlapping coverage items with your individual indemnity insurance. Although there is a method to suspend group indemnity insurance and receive part of the premiums paid by the company, most companies do not implement this due to taxes and other reasons.

When resuming individual indemnity insurance, you can choose between the policy you had at suspension or one currently on sale. If the coverage change cycle (5 to 15 years) has passed and re-enrollment in the old product is not possible, you can only re-enroll in a new product available at the time of resumption.