As parents, we are always worried about our children. Questions such as “What happens if he falls? Will he have a permanent scar on his forehead,” are well, unavoidable. So when a family friend comes up to us and asks if we have purchased protection for our children, we start to feel the FOMO (Fear Of Missing Out) and wonder if we have done enough for them.
Well, do you really need insurance for your child? Why should you buy insurance for your child? And at such a young age, what exactly could go wrong? Let us break that down for you:
Firstly, premiums are affordable when your child is young and healthy. Secondly, with a clean bill of health, your child will be able to obtain full coverage with no exclusions. Thirdly, it is not just health insurance that you should get. If you are looking to save up for your child’s education, an endowment (savings) plan could help you out in your finances.
With all that said, there are important steps that you need to take into real consideration before purchasing your child’s insurance. Read on as we shed light on the four things that every parent should look out for.
First, evaluate your and your spouse’s coverage
Take into consideration of both of your coverage. Does your spouse hold a company insurance that provides the whole family with health coverage? Or, does it only cover him and one dependent? If this is so, how much more will it cost to add on your child as a dependent? Adding a child into the company policy may sometimes increase its overall cost. Whether it’s an individual policy or a rider that you are adding, remember to read all fine prints and evaluate the costs of premiums, before deciding on one.
Short term vs long term
A term policy is of course, very affordable, especially when premiums are low because your child is still young. Plus, the sum assured is generally higher than whole life insurance. However, a term policy only has a period of 10 to 30 years of coverage. This means that your child will need to repurchase a life policy for future coverage, upon the end of her term policy. If she happens to suffer from any health conditions, she will be considered as a high-risk individual and hence, may not be able to get full coverage for her future life policy.
On the other hand, a long-term policy such as a whole life insurance can guarantee that your child stays protected throughout her life, despite any health conditions or illnesses that appear throughout her journey. It may, however, be more costly, as compared to term insurance.
Choice of payouts
Most child plans give out regular payouts upon maturity, which ensure that the money you have invested can be spread across a period of time and yet, fund your child’s education and needs at the same time. For example, instead of receiving a lump sum of $50,000, you may choose to use your first two payouts to pay for your child’s tuition fees and laptop.
Otherwise, a lump sum payout can ensure that the major long-term goals of your child (e.g. milestones that require a substantial amount like studying overseas and marriage) are met.
Also, do consider that you might run into financial emergencies. For example, if you have just lost your job and is very much in need of funds, are you allowed to do partial withdrawals from your child’s policy? And how much would it be? Will there be an interest rate? Hence, it is important that you start speaking to your financial provider to find the right plan that suits your needs.
Type, affordability and cost
Health, endowment, life or term? What type of insurance should you get? How much does it cost? What about the sum assured you will get?
Are you hoping to offer a good headstart for your child through the returns from the endowment plan to fund his tertiary education? Well, it sounds like a good choice. Endowment plans tend to have a period of between 10 to 20 years and can provide guaranteed cash benefits. However, you are required to stay committed throughout the whole period, and the penalty for early termination can be very costly.
While premiums for children can be affordable, be sure to calculate the benefits that you will be getting. Should anything happen to you, a plan with a low premium may not be as effective if you are unable to pay the out-of-pocket costs.
If you would like to learn more about getting the best insurance for your child, our professional financial consultants will be more than happy to assist you: https://gtgroup.sg/contact-us/. And now, you can finally say that the FOMO will no longer be there.