One of the strategies that the Heartland Couple adopted as first-time parents was division of labour. As simple as it sounds, it helps to minimise duplication of efforts and keep their sanity in check. As a counsellor, Heartland Girl naturally gravitated towards topics such as well-being and communication. Meanwhile, since Heartland Boy is passionate about personal finance, he took on the (no-less important) responsibility of purchasing insurance policies for his newborn. He got his independent financial advisor to propose the best policies available in the market at that time and compare the pros and cons of each policy plan. Here is a summary of the baby insurance plans that he bought for his child, Olympia.
1. Hospitalisation & Surgery Insurance
Hospitalisation & Surgery policy, also known as an Integrated Shield Plan, should be purchased as soon as possible. The earliest that it can be bought is when your newborn turns 15 days old. The advantages of buying a health insurance policy early are:
- Health conditions (if any) for the baby may not have set in yet and this increases the insurability of your child
- Protect parents against hospital bills that can become prohibitively expensive
Heartland Boy learnt it the hard way as Olympia was hospitalised on Day 9 for fever. With no insurance coverage (this was out of scope of Heartland Girl’s maternity insurance), the damage to Heartland Boy’s wallet was $4K+. Even though Olympia was discharged without any complications (it turned out to be just a normal flu strain) the insurance underwriting process was quite cumbersome. Doctor’s reports must be submitted, numerous questions were asked and lots of declarations had to be made. At the end of the day, Heartland Boy is thankful that Olympia was successfully accepted into her H&S policy without any exclusions. Therefore, do buy your integrated shield plan early to avoid the worries and hassle that Heartland Boy went through. Note that Medishield Life does not cover Class A/B wards and it is Heartland Boy’s preference to have this option available should the need arises.
2. Personal Accident Insurance
It is widely acknowledged that toddlers are more prone to accidents when they first attempt to crawl or walk. Even under the close supervision of the adult, the child can still potentially fall in an instant. (Heartland Boy confess that he was guilty of that on several occasions) Serious falls may lead to bodily injury that require outpatient medical treatment. In addition, children are also more susceptible to infectious diseases such as Hand, Food and Mouth Disease, especially if they attend infant care or child care.
As such, the medical expenses benefit of a personal accident policy provides a degree of financial protection against these common events. Heartland Boy also added a childcare benefit rider to Olympia’s Personal Accident policy to cover for more events such as death of policyholder (that is Heartland Boy), child disability, as well as an increase in accidental medical reimbursement coverage etc.
3. Whole Life Insurance with Early Critical Illness Rider
After the first two policies were purchased, he proceeded to purchase a whole life plan that comes with Early Critical Illness rider. Specifically, he bought a limited-pay whole life plan when the premiums will cease when Olympia turns 25 years old. The first-year premiums of these policies were all funded by the Baby Bonus Cash Gift from the government, which he is thankful for.
Getting critical illness insurance for your kid is important as the lump-sum payout can help with the heavy treatment costs that such medical treatments often entail. It may also come in useful to cope with an increase in expenses due to lifestyle adjustments (eg: hiring a maid, part-time nurse or purchase of expensive medical equipment). This gives the emotionally-strained family some peace of mind and one less concern to worry about. If cashflow is not an issue for the family, getting the kid incepted early is also helpful as the premiums are locked in at a lower rate. Life insured who are young have cleaner bills of health and are considered “lower risk” in the eyes of the insurance providers. Perhaps the contentious debate here is why Heartland Boy went with a whole life insurance policy instead of a term plan. These are his reasons:
A) The coverage for Olympia would be for life under a life insurance. If Heartland Boy had chosen term insurance instead, the coverage is only for the duration of the policy (eg: 30/45/55 years) If she decides to increase the coverage upon the expiry of the term insurance subsequently, there is no guarantee of her insurability as a separate underwriting process would be required. It is possible that new pre-existing health conditions might crop up.
B) As often repeated throughout this article, given that a newborn is still young, the premiums locked in will be the lowest possible in the life assured’s time. Therefore, Heartland Boy simply bit the bullet and started the journey as early as the family could afford to pay.
C) Since whole life plan is a par policy, it would have accumulated cash values from the reversionary bonuses declared by insurance providers. If Heartland Parents successfully complete payment of the premiums, the policy can become another savings vehicle for Olympia as she embarks on her next stage of life.
Important Insurance Planning For The Family
Note that while the aforementioned policies are important for your child, what is actually even more urgent is to ensure that the parents are well-insured in the first place. That means sufficient healthcare insurance, disability income insurance and life/term insurance coverage for themselves first. A kid is truly a dependent who is unable to fend for herself. Therefore, a situation whereby there is no income coming into the family as a result of a parent’s death or inability to work is a terrible financial situation for any child to face so early in her life. Taking care of yourselves first would also be an excellent gift for your children.