Welcoming a new member into the family means having to welcome new additions to your insurance portfolio as well.
I remember the first time I became a parent. I was still living at home with my own parents, which saved me a lot of money. I didn’t have to worry about a mortgage and home maintenance yet, and I could focus on my kid and all the expenses associated with him.
At that time, these expenses were minimal: diapers, sundry baby items and his medical check-ups. We didn’t need fancy baby brands or organic everything.
For young parents who are still living at home like I did–not uncommon in Singapore–they can often benefit from living rent-free and getting babysitting help from doting grandparents. So in the early days, before the baby turns into a creature who needs tuition, enrichment classes or savings towards a costly university education, new parents would do well to prepare themselves financially for those times to come.
This begins with protecting themselves with the right insurance plans, if they haven’t already done so. Here are the plans that we think new parents should be building into their portfolio.
#1: Whole life or Term insurance
As a parent, you’re no longer only responsible for yourself. If anything were to happen to you (especially if you’re the sole breadwinner), you’d want to make sure that your child and spouse or caregiver are left with a sum of money that can take care of immediate financial needs and set them up for their future.
Few people have the means to immediately set up a trust fund for their children. But luckily, there are two main types of life insurance that’ll bring some reprieve for the family: a whole life plan, which covers you until your eventual demise (hence its name), or a term life insurance, which covers you for a period, up to, say, age 65 years.
The latter usually comes with a much lower premium in exchange for a fairly sizeable death and disability coverage. It is especially crucial during the years when your children are dependent on you. For whole life, since it comes with cash value, it is usually taken up by those with long-term retirement planning in mind, albeit at a higher premium.
For those who are just beginning to put together a portfolio for the new life, this should be your first buy.
#2: Health insurance
So you already have life insurance – great. What’s next? Definitely a health insurance plan for yourself (if you don’t already have one) and for the child.
Health insurance will cover hospitalisation as well as treatment, depending on the type you have. Medisave and MediShield Life (which all Singaporeans have) pay for these up to a point and depending on the type of illness or treatment required, as well as the category of hospital stay, the patient would have to co-pay the remainder that is not covered. This is why most insurers sell an Integrated Shield Plan that enhances your MediShield Life coverage and benefits and covers most of the co-payment amount.
You can also purchase a health plan for your baby, a wise thing to do as plans are much cheaper when they’re young. This pre-empts a possible scenario where your kid suffers a pre-existing condition under the plan.
#3: Critical Illness
If you already have health insurance, consider adding a Critical Illness plan. You wouldn’t want to be unpleasantly surprised by the financial burden upon the discovery of a serious illness that needs costly, out-of-pocket treatments.
A Critical Illness cover can finance such a situation. If your family has a history of cancer, you should also consider getting a specific cancer care plan or add a rider to your critical illness plan.
#4: Personal accident insurance
Once your life and health coverage needs are sorted, you can consider other basic and affordable plans to complete the package. A personal accident plan is a useful addition, especially in these uncertain COVID-19 times and with the Dengue outbreak on the rise.
Personal accident plans have taken on a hybrid nature of late to also cover infectious diseases. Some of the main benefits you can claim for include in/outpatient medical treatments, daily hospital cash, physiotherapy and more.
You could even consider getting a plan not just for the sole breadwinner of the family but for baby too; think about how their lower immunity makes them more susceptible to illnesses, and you won’t have to pay out of pocket if either an accident happens or infection strikes.
#5: Endowment plans
Children’s education has always been parents’ top priority in Singapore. That requires much financial pre-planning, especially if you want to see them through a good university education. Sure, you can do it the traditional way with a normal savings account, but there might be a better method to have…
a) your money grow exponentially;
b) the value of your savings avoid getting eroded over time with inflation.
Even if I were to pinpoint high yield savings accounts that earn you an interest between 1 and 3%, they require ‘target hitting’ such as salary crediting and a minimum number of transactions, plus (a relatively high) credit card spend. And the worst quality about it that could derail your plans is its high accessibility.
In comparison, an endowment insurance plan is truly savings-focused and nets you higher interest compared to any bank’s savings account. Depending on the premium term you choose and the payout structure offered by the insurer, you may earn an interest of 3% or higher.
Let’s not forget that endowment plans have that added benefit of death and disability payouts if something bad happens.
Protected up to specified limits by SDIC.
Note: This is only product information provided. You may wish to seek advice from a qualified adviser before buying the product. If you choose not to seek advice from a qualified adviser, you should consider whether the product is suitable for you. Buying an insurance product that is not suitable for you may impact your ability to finance your future healthcare needs.
If you decide that the policy is not suitable after purchasing the policy, you may terminate the policy in accordance with the free-look provision, if any, and the insurer may recover from you any expense incurred by the insurer in underwriting the policy.
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Personal Accident vs Life & Medical Insurance: What You Need to Know
By Ana Ow
Ana has been a travel writer for various news outlets since 2007 and has a passion for crossing things off her bucket list (tiger safari in India, checked; meeting with the Dalai Lama in Ladakh, checked; Northern Lights sighting in Norway, checked thrice). She loves collecting visits to UNESCO World Heritage Sites (preferably with her husband and two children) and is obsessed with Disney parks and cruises.