6 VHIS Common Misconceptions Exposed – Is It Worth Buying?

Online sources point out that “many people assume VHIS has government certification, so they can buy it without a second thought, but in reality, VHIS isn’t launched by the government.” So, if you’re buying it solely because you think it’s government-backed, you might be setting yourself up for disappointment.

Although the government isn’t the insurer for VHIS (meaning you’re insuring with private companies, not the government itself), the Department of Health (also known as the DH) put a lot of thought into designing it. They set strict standards that insurance companies must follow, so even without the government as the insurer, VHIS still offers some solid benefits:

Benefit 1: All VHIS Plans Provide Basic Coverage for Policyholders

The government established “minimum requirements” and “12 essential coverage items,” and insurance companies must meet these conditions to launch certified products. This includes (but isn’t limited to) at least HK$420,000 in annual coverage and guaranteed renewal up to age 100. That means every VHIS policyholder can rest assured they’ll get this basic level of protection .

Before VHIS came along, insurance companies could design products however they wanted. It was tough for buyers to compare and know if they were getting fair coverage compared to the market.

VHIS changed that by setting a clear baseline for “basic coverage,” which not only helps consumers but also raises the bar for the entire industry. Imagine you’re an insurance company —to stay competitive, you’d have to step up your other health plans to match or beat VHIS!

So, the government’s role didn’t just create a product with basic safeguards; it established a standard for the whole insurance world. This gives policyholders a clear idea of what “basic protection” looks like, making it easier to compare options. Plus, you get the basics and can add on Flexi Plans for extra coverage if you need it.

The government isn’t the insurer for VHIS, and under the current plans, people with pre-existing conditions might not get coverage—but that doesn’t mean it’s impossible.

As per the current plans (which is standard for all health insurance in Hong Kong ), policyholders must go through “ underwriting ” for the policy to be approved and take effect. Insurance companies use this process to assess the policyholder’s age, gender, and health status to evaluate risks and decide on coverage.

If you’re in good health and pass underwriting smoothly, your policy kicks in, and your premiums will match the “standard VHIS rates” (which are all listed on the official VHIS website for easy reference).

If you already have a medical condition, you might encounter these scenarios:

1. Loading : Paying higher premiums than the standard rate to get coverage
2. Adding exclusions : The insurance company won’t cover specific conditions or organs related to your illness
3. Declined coverage: You might not get insured at all

So, it’s not that everyone with a pre-existing condition is out of luck.

You might wonder why folks with health issues can’t just pay the standard rate or might get denied altogether. Well, it’s all about risk management—insurance companies have to keep their products sustainable.

What risks do insurance companies face in underwriting?

Let’s break down how health insurance works: Companies collect premiums from policyholders into a pool of funds (think of it as a risk pool). If a policyholder needs to make a claim, the payout comes from that pool.

Want to dive deeper into what insurance is and its core ideas? 👉🏽 Read this article !

If everyone paid the same premium but some people were more likely to claim due to higher health risks, the company might have to raise rates for everyone to keep the pool funded. That wouldn’t be fair to the healthier folks.

That’s why, during underwriting, companies review each person’s situation and price accordingly to keep things sustainable. This way, once you’re covered, you can continue affording it long-term, even as your medical needs grow with age. It’s a smart system that prevents premiums from skyrocketing and helps ensure you don’t lose coverage over time.

Online sources claim that ‘VHIS, like general medical insurance, has claim limits on every item of coverage, potentially leading to incomplete reimbursements, with serious illnesses covered at rates as low as 30%.’

While we’re not entirely sure about the source of that 30% coverage rate, VHIS actually offers broader coverage than typical standard medical insurance. For instance, it includes coverage for specified diagnostic imaging tests and day surgeries performed on an outpatient basis, which aren’t always covered in ordinary plans.

As for the claim limits on each item and the idea of ‘incomplete payouts,’ this isn’t necessarily a trap.

Setting claim limits on individual items allows policyholders to get adequate medical coverage while keeping premiums affordable. Of course, if you want full reimbursement without item-specific limits in VHIS, you can offset the deductible with other personal or company insurance, making it just as budget-friendly!

Take Bowtie as an example—both of our products offer:

As for the VHIS “claim ratio” being “relatively low”? From the latest data , it can be seen:

• In 2021, 93% of claim cases were successfully compensated
• Cases with full compensation accounted for about 39%
• Cases with a payout ratio of ≥ 90% accounted for about 65%
• Cases with a payout ratio of ≥ 80% accounted for about 78%
• Overall, the average payout ratio for all claim cases throughout the year was about 89%

It’s not as low as some online discussions suggest.

Of course, the claim ratio varies between insurance companies, so before purchasing, you can request past claim statistics from the insurer to see if their record aligns with the market average.

If you’re interested in VHIS, you probably know that insuring with this product allows for tax deductions , but many think the “pitfall” is that the deduction amount isn’t much. However, you should recognize that tax deductions are more of a “bonus” and shouldn’t be your main reason for buying.

When insuring, the key is to choose a plan that suits you. If you’re wondering what type of medical insurance fits you best? 👉🏽 Check out this article .

Of course, you should also make the most of the tax benefits to maximize your savings. So, what methods can help you deduct more tax?

Simply have one family member (the taxpayer) as the policyholder for all family members, and you’ll naturally deduct more tax! Here are two hypothetical examples to show how to maximize your deductions!

If you want to learn more about the VHIS tax deduction calculation and other background details 👉🏽 Read this article .

Many people online consider the fifth pitfall of VHIS to be the clause on ‘ unknown pre-existing conditions ‘, partly because it’s hard to define and partly because you only get certain compensation starting from the second year after subscription.

The definition of ‘unknown pre-existing conditions’ is any illness that the insured person was unaware of before subscription, with no obvious symptoms or signs, and for which no doctor was consulted or treatment sought.

In reality, compared to other health insurance plans, VHIS offers relatively comprehensive coverage with clearer terms—because past medical insurance contracts might not have specified how to handle unknown pre-existing conditions, potentially leading to outright claim denials and disputes between insurers and policyholders.

So, how can it really be seen as a ‘pitfall’ when VHIS still provides coverage?

Although the VHIS Approved Product Policy Template states that the waiting period for unknown pre-existing conditions is 0% in the first year, 25% in the second year, 50% in the third year, and 100% from the fourth year onward, many insurance companies have shortened this waiting period—some as short as 30 days.

To address the coverage gap for congenital diseases in general medical insurance, VHIS requires insurance companies to cover congenital diseases, but many people dub it a “trap”. The reason is that congenital diseases must appear or occur after the age of 8 to be covered, while the market already has plenty of plans that cover congenital diseases starting from age 0.

In reality, simply comparing coverage scope and terms to judge whether a product is worth buying or if it’s a trap isn’t wise—it’s like a middle-class family complaining that their house isn’t as big as a mansion on The Peak. Sure, the mansion is better, but can everyone afford the mortgage?

Indeed, more and more insurance products on the market cover congenital diseases from age 0, but Bowtie has found that many of these are ” Pregnancy Insurance ” and ” Term CI “.

• The former offers short-term coverage, providing mothers and babies with several years of pre- and post-natal protection.
• The latter is often ” Whole Life Critical Illness Insurance “, which includes a savings component and mainly provides a one-time or multiple lump-sum payouts for critical illnesses.

Both differ fundamentally from VHIS and general medical insurance in terms of coverage duration and purpose, making direct comparisons tricky. Plus, premiums for these plans aren’t transparent, and it’s hard to find standard rates online. However, if you’re somewhat familiar with insurance, you probably know that whole life critical illness insurance is generally more expensive than term critical illness (with monthly premiums potentially 10 times higher ¹ ).

Buying insurance is a lot like investing—just think about your budget and needs before deciding. Opt for a plan with reasonable coverage that you can actually afford, rather than the most comprehensive one that breaks the bank!