This article was written in collaboration with MoneyOwl. All views expressed are the independent opinion of DollarsAndSense.sg
Becoming a new parent comes with the inexplicable joy that few other experiences in life can ever match up to.
However, it also brings its own set of responsibilities that many of us first-time parents may find ourselves unprepared for. Fret not – if you don’t feel fully prepared to be a parent, you are definitely part of the majority.
Between the never-ending diaper change, late-night feeds and having to be responsible for your little one 24/7, it’s easy to forget that getting the right insurance policies for your child is another important area that should not be overlooked.
Child Insurance 101s
Most of us do not consider ourselves as insurance experts, especially when it comes to deciding what type of insurance policies we should buy for our child. Some may even have the misconception that since our little ones do not have any dependents to support, there is no need for us to buy any insurance for them yet.
When you buy insurance for your children, you are not buying it just to protect them but also for you and your spouse.
Think about it. When you buy a hospitalisation plan for your child, what you are insuring yourself against is the possibility that you may need to spend a large sum of money, either in cash or via your MediSave account, in the unexpected event that your child has to be hospitalised.
In the unfortunate event that a critical illness occurs, many parents would make the decision for at least one of them to stop working for a period of time. During this period, the loss of income along with additional expenses incurred by the family (e.g. medical cost, medical equipment, engaging external help such as a domestic worker) would require additional funds. A lump-sum payout from a critical illness plan provides this.
In other words, buying insurance policies for your child is to protect you financially as much as it is to protect your child.
Pro Tip: Buy Insurances For Your Child As Early As Possible
If you intend to buy insurance policies for your child, do it as early as possible.
The reason is simple. As long as your child is delivered without any health complications or congenital disorders, they would be deemed as having no pre-existing illnesses. It also means they will receive full coverage without any additional underwriting or further tests required.
If you choose to buy insurance policies for your child at a later age, you run the risk that a health complication could develop before that. Once this happens, it becomes harder to get the coverage that you want, and you may be 1) required to provide a memo from the doctor (at your own cost) that your child has no major health issues or 2) may even be rejected by the insurers.
How Much Should You Expect To Pay For Child Insurance?
When it comes to buying insurance policies, always remember two key principals.
#1 Your insurance policies should fit to your long-term budget
You should always buy an insurance policy with a view of how it can protect you over the long-term, or maybe even your entire life, and not just in the short-term. We believe it’s better to spend less on insurance, but to have this protection for as long as you need it, than to overspend on insurance, only to have this protection for just a few years before it lapses because we can no longer afford the insurance premiums.
#2 Your insurance policies are meant to protect you, not generate investment returns for you
We should get insurance policies because of the protection value it offers us, rather than to look at the returns that we can get from our policies. Always remember that insurance should primarily be meant for our protection, and not to help us generate investment returns.
Child Protection Plan (Via MoneyOwl)
To help parents with their child insurance planning decisions, MoneyOwl has come up with some simple insurance bundles for parents to choose from. MoneyOwl is a joint venture between NTUC Enterprise Co-operative Ltd and Providend Holding Pte Ltd.
Basic Package (Option 1) – $27/month – Provides $150,000 term life insurance coverage for critical illness, death and total and permanent disability (TPD) till age 65 + hospitalisation coverage up to Class A ward at public hospitals (co-payment of 10%).
Basic Package (Option 2) – $57/month – Provides $150,000 whole life insurance coverage (pay for 25 years, cover for life) for critical illness, death and total and permanent disability (TPD) + hospitalisation coverage up to Class A ward at public hospitals (co-payment of 10%).
The main difference between the two basic packages is that while option 1 offers a term life plan that covers your child till age 65, option 2 is a limited pay, whole life plan which covers them for life. Naturally, you pay more for the coverage each month for option 2 since you are getting coverage for life, and only paying for 25 years.
If you feel that the basic package isn’t sufficient, you can also opt for the deluxe packages. The main difference between the two is that the deluxe packages provide a higher level of coverage.
Deluxe Package (Option 1) – $74/month – Provides $200,000 term life insurance coverage for critical illness, death and total and permanent disability (TPD) + $100,000 term life coverage for early-stage critical illness (both till age 65) + hospitalisation coverage at private hospital (co-payment of 5%).
Deluxe Package (Option 2) – $149/month – Provides $200,000 whole life insurance coverage for critical illness death and total and permanent disability (TPD) + $100,000 whole life coverage for early critical illness + hospitalisation coverage at private hospital (co-payment of 5%)
So, from as little as $27 per month, or $324 per year, you can get your child the basic insurance policies that he or she should have.
MoneyOwl’s Bionic Approach Towards Financial Planning Can Address Any Customised Needs That You May Have
Because it’s offered as a package, it’s natural to think that you can only choose the bundle that suits you best and to go for it.
However, MoneyOwl’s bionic approach towards financial planning means that they have a team of salaried advisers, not remunerated by sales commissions, who can help you customise the insurance policies that you need, based on any additional requirements that you may have.
For example, if you feel that none of the bundles are sufficient in addressing your needs, then the financial advisers can guide you through your insurance planning decisions, answer any questions or clarifications that you have, and ensure that you get only the policies that you want and need.
Besides getting the right insurance policies for your child, you and your spouse should also consider reviewing your own personal insurance requirements. With an additional dependent now in the family, there could be some insurance gaps that you may need to cover yourself for in order to ensure that your bigger family continues to be adequately protected.