Every parent desires to ensure the safety of their children. The route one takes in protecting children does not rely on instinct alone. Proper planning and informed decisions are necessary to ensure your child is under proper care and protection from the day they are born. One way of ensuring your children are safe and their future is secure is by insuring them. In Singapore, there is a range of insurance options one can pick from for your child.
Timing of buying an insurance plan
It is important to have insurance for your child from a tender. Do not stop to think that since your child has just been born, they don’t need to be covered. This is normally the best time to take that insurance cover. Despite the child being healthy without any illness, they can be susceptible to disease. The advantage of taking an insurance cover for your child immediately they are born is because they qualify for coverage without exclusions. Usually, insurers will not cover you for conditions or ailments you have before purchasing an insurance plan.
The other reason why cover for your child at a tender age is important is because of affordable premiums. Children normally have clean bills of health, and therefore, they present low-risk cases from the viewpoint of the insurers. Therefore their premiums cheaply priced but from there they can go up and be very expensive. If the child does not have any complication or congenital disorder, they get insurance without more underwriting or more tests.
If you are thinking of planning the future of your child, then this is the right time to begin. Insurance for your child should be part of financial planning. If for instance, you have an endowment plan, you will get cover beyond just illness or death. It will save the future of your child in terms of education or any other major event.
Don’t wait until a late age to buy a policy for your child. You risk the possibility of health complication developing before then, which will make insurance expensive. If you wait to get coverage later, it will be costly. You will need to have a memo from a doctor showing your child doesn’t have any health issues. Also, there is a possibility of insurers refusing to cover you.
Types of insurance plans
1. Prenatal insurance
Prenatal insurance covers the mother and the unborn child during pregnancy up to birth and after. It covers pregnancy complications such as postpartum hemorrhage, abruption placentae, fatty liver of pregnancy, amniotic fluid embolism, as well as death. For the baby, it will cover congenital illnesses as well as hospitalization. Some insurers provide cover for up to three years. This cover has hospital benefits of up to $200 plus per day of hospitalization. It is important to note that these kinds of investment-linked plans offer low coverage, and thus having a whole life insurance plan will be appropriate.
2. Whole life insurance
This insurance plan covers your child from a tender age, and it is mainly for protection. After some time, you can add other riders such as hospital care benefits and critical illness coverage to the policy. This implies that if your child becomes critically ill, disabled, or dies, the insurance policy pays you the sum assured. In the first few decades of the child’s life, there are options in the market for doubling or tripling the sum assured.
The whole life insurance policy besides protection also accrues cash value implying that it is a way of saving. You can withdraw a lump sum more than the total premiums contributed over the years. It is important to note that after drawing the cash value out of the policy, all other protection benefits cease.
3. Endowment policies
Endowment policies enable you to save for a specific purpose in the long term. The term of an endowment plan is usually 10, 15 or 20 years. The amount assured is usually low, but you will get the same protection. It is a way of encouraging saving, and it offers higher returns than bank deposit rates.
If you are looking to save for your child’s university education then at age one take a 20-year policy. If the child is six years, take a 15-year policy, and if they are 11, you can take a 10-year plan. Always opt for a longer endowment policy because with the compounding effect you will be saving considerably lower amount.
The cost of child insurance
When considering an insurance plan always ensure that it fits your long-term plans. Buy a policy that is going to protect your child for quite some time or even the entire life. It is nice to spend less on a plan but get longer protection instead of overspending only to get cover for a few years.
Equally, when getting an insurance plan, you should not consider the returns you will get from the policy, but the protection value it offers. Insurance is for protection, not the generation of investment returns. You can get a basic package which provides a $150,000 term life insurance policy at around $27/month. It covers permanent disability, critical illness, and death up to 65 years plus hospitalization cover at public hospitals.
You can opt for whole life insurance which will cover your child for life. It offers whole life insurance coverage for $150,000 at $57/month, you pay for 25 years and receive coverage for life. It covers critical illness, permanent disability as well as death plus hospitalization coverage at public hospitals.
Alternatively, there is higher levels coverage where at $74 per month you get a $200,000 term life insurance coverage for up to 65 years. Or you can opt for a package of $149 per month which offers $200,000 whole life insurance coverage. You get cover for total and permanent disability, critical illness, and death plus $100 whole life coverage for early critical illness and hospitalization in private hospitals.
(By Neha Gupta)