This article was written in collaboration with AIA. Views expressed in the article are the independent opinion of DollarsAndSense.sg.
As parents, we naturally want what’s best for our children. Very often, we may even put our children’s needs ahead of our own. For example, many parents may splurge on what their children want or need, such as toys, comfortable clothes and enrichment classes, while at the same time, scrimping when it comes to themselves.
If loving our children means putting them first in everything that we do, then it’s also worth thinking about why we are reminded during safety briefings on airplanes to take care of ourselves first in the event of an emergency, before we take care of young children who are travelling with us.
The reason for this is simple. If there is an emergency, our little ones need us to take care of them. But if we do not take care of ourselves first, we won’t be in a position where we will be able to take care of them.
Insurance Planning Means Caring About Others, By Putting Ourselves First
Insurance planning is an essential component of being financially prepared as a family. While investing helps us plan for our future, insurance ensures that we will still be financially protected even if accidents, illnesses or death occurs.
As parents, we need to prepare ourselves and our children against adverse circumstances. While we shouldn’t be living our lives expecting bad things to happen (just like we don’t board a plane expecting that it will crash), it’s sensible to take precautionary measures while we still can to ensure that our family is ready for the curve balls that life throws at us.
Life insurance is an example. When we buy a policy to cover ourselves, we are actually buying protection for our children. It ensures that if anything does happen to us, be it death or permanent disability, our children will be financially protected and supported even if we are no longer around.
Saying No To Life Insurance Puts Our Children At Risk
Not buying life insurance for our family is like setting sail on the Titanic without having enough lifeboats. If everything goes well, then nobody is going to notice anything amiss.
However, if something does happen, then similar to the Titanic, we will be caught off-guard. If we are no longer around, our young children will face the financial consequences of being unprepared to tackle the crisis.
To be clear, financial hardship is just one of the many challenges that our children might need to overcome if we are no longer around. While our presence in our children’s life cannot be replaced, the income that we would have earned to support them can be protected through insurance.
How much you need to provide for your children is dependent on a few variables:
How much your children need until they become independent? In Singapore, most people start working in their early 20s. Ideally, you should factor in the cost of providing for each child until the age where they can be expected to start providing for themselves.
Do you intend to pay for university? University education is notoriously expensive, and it would easily cost $8,000 or more (in today’s dollar terms) each year, up to a period of four years. If you are intending to fund your child’s university education, you will need to set aside this sum of money.
Other additional cost incurred? In your absence, it’s possible that your spouse may 1) decide to stop working to take care of the children or 2) engage additional help e.g. employ a domestic helper.
Number of children you have? The more children you have, the higher the life insurance coverage you will need to ensure sufficient protection for all of your children. Regular reviews with a trusted financial adviser, or when you enter a new phase in life, would be useful in ensuring you identify gaps in your protection.
Don’t get us wrong, buying life insurance for your children is also important. At the same time, buying the right insurance plan for your child while neglecting your own coverage is akin to putting on a life jacket for your children, while forgetting to put it on for yourself. You first have to protect yourself, before you can effectively protect your children.
Getting Adequate Insurance Coverage Doesn’t Need To Be Expensive
Getting sufficient insurance coverage does not need to come at a heavy cost.
In fact, not getting the right insurance policy that you need for yourself can be very costly if something unexpected were to happen. Delaying the process of getting the right life insurance policies that you need can also be risky, as any health-related issues that crop up during the period where you are not covered might make it difficult for you to buy the life insurance policies that you need in the future.
How much you pay for your life insurance policy is largely based on 1) how long you want your coverage for and 2) the sum assured that you are looking for.
Whole Life Insurance: As its name suggests, a whole life insurance policy provides you with coverage for life, or up till age 100. This means that regardless of what age you may pass on, the policy will continue to be in effect unless you surrender it. If you reach age 100, the policy matures, and you receive the cash value.
AIA Guaranteed Protect Plus (II) is an example of such a plan. Designed as an affordable one-stop solution, it not only offers you a guaranteed cash value accumulation based on your needs, but also provides you with the opportunity to boost your coverage by up to 5 times, till age 65 or 75, giving you additional coverage in life when you need it most.
To best suit your budget, you have the flexibility to choose a premium term of either 12 years, 20 years or to pay till age 65/75. Additionally, if you reach a major milestone in life such the birth of a little one, you have the option to purchase another whole life or endowment policy with no further medical questions asked.*
Term Life Insurance: If you only need coverage for a certain period of time, you can choose to opt for term life insurance coverage. Because coverage is only for a limited period of time in your life, premiums for term life insurance tends to be lower.
An example of such a plan you can consider is the AIA Secure Flexi Term. With premiums from as low as $1.36 a day for a $1 million coverage, there is no good reason to not buy sufficient insurance coverage to ensure that your children will be protected financially in the event that you are no longer around.
For additional piece of mind, you can also enhance your protection with riders for critical illness protection and disability protection.
As part of AIA’s 100-year journey celebration in 2019, AIA Singapore is offering a limited time promotion so you can also celebrate important life stages of your own such as having a child by ensuring that you protect your children’s future.
From now till 15 December 2019, you can enjoy up to 30% discount on your first year’s premium. Find out more here.
*T&Cs apply, refer to product page.
(This article has not been reviewed by the Monetary Authority of Singapore)