At the beginning of 2018, I signed an interesting woman – director level in her early 50s, with two kids.
She was pleased with my work on Early Critical Illness and purchased a policy from me, along with a large Term Life for the next decade - which naturally required a nomination.
During the nomination, something really weird happened while she was listing off her nominees.
At least, to me at the time.
CLIENT: …and x% to my nephew and niece.
MONEY MAVERICK: *blinks* I’m sorry what?
CLIENT: (repeats herself louder, thinking that I didn’t hear her)
MONEY MAVERICK: (heard her correctly, but thought that he had heard it wrongly)
[Husband looks at me with increasing amount of doubt]
CLIENT: (takes paper) …Let me write it. (proceeds to say something about the ICs being with her anyway, which is true)
Disclaimer: Money Maverick is not the kind of Financial Consultant who is bursting with sensitivity/EQ. Please be patient with him.
I remember cycling back to the office with the nomination form in my bag (OFO was still a thing at the time) and wondering: Why would you do that?
You have your own children. They are also not fully grown.
Why on earth would you want to leave money for your sibling’s kids?
I mean your sibling, MAYBE, but your siblings’ kids?
…Anyway, she had a whole bunch of money and she wasn’t exactly non-financially savvy, so there was nothing for me to object about – it was much more personal than professional. I tried to empathize, but I just couldn’t get it.
I’ve had cousins which have given me fairly lovable nieces and nephews in some sense, but not enough for me to give them money on top of all the people in my life already.
In any case – supposed the 25-year-old me at the time – maybe she just likes her extended family that much. It wasn’t something I could understand.
At least, not for another 7 months.
When It Hits You
7 months later, on August 2, 2018 – my niece, Esther Lee, was born into this world.
This made me even happier than when my 'expensive' Asia Ex-Japan investments destroyed the Q1 2019 results of the low-cost IWDA ETF (23% to 8% net of fees) like it has been doing even before 2007, with little market-predicting effort.
Focus China did even better at 32%.
[Sorry, couldn’t resist.]
My sister has been a role model for me growing up, so it’s not like it was particularly jarring to think that she was going to become a parent, but – wow.
That came out of her?
This form, so small and precious and… Everything.
I don't have children of my own - but it's amazing what a newborn brings to the rest of the family.
The house feels so full of life and vitality in a manner that wasn't there before.
My sister is around more, which is nice.
I'm also learning a lot from watching my sister, mum and brother-in-law operate, which will undoubtedly make the process easier for me in the future...
...And honestly, I want to buy all the stuff.
Like ALL the stuff.
If I could afford it - I would buy the best strollers, mats, miscellaneous equipment, toys, insurances and everything possible for her.
I have no idea how people act rational when it comes to children, I really don't. And I don't even have one yet.
But Financial Planning needs to be disciplined and logical.
Not 'Overwhelmed-by-cuteness-so-you-buy-a-cute-mat-for-your-niece-at-the-baby-fair-you-are-supposed-to-be-working-at', kind of discipline and logic.
Here's why a Maternity plan is an absolute must for my future family, and probably for yours also.
1. Little to No Underwriting
I think most people would agree that the preservation of a child's insurance rights is the most important aspect of Maternity Insurance. Very little people actually care about the payout, especially if the child dies - that small sum of money will be a small comfort.
But the purchase of a Maternity plan reserves you an increased right to ensure that your child can purchase insurance in the future, regardless of their health condition.
There are two ways:
Simplified: Often with standalone Maternity plans where you can sign up for a new insurance policy with a simple health declaration, rather than the full medical underwriting.
Guaranteed: In slightly confusing fashion, the purchase of the Maternity plan allows a parent to purchase an insurance policy for themselves that can be passed down to a child as the Primary Life Insured. The process is a little complex - but the end result allows your child to have insurance coverage even if there are issues that prevent the child from being insured upon birth.
It can be caused by a range of issues from being severely underweight, to as poor as having a serious disease like Down's Syndrome. I don't know about you, but I would shell out a serious amount of money to guarantee my child has some form of insurance for the rest of their life. Thankfully, a Maternity plan (+bundle) doesn't require a serious amount of money.
2. The Insurance Payouts and Coverage
It's usually assumed that Maternity Insurance is i) only for the Child and ii) expires upon the birth of the baby with no issues. Maternity Insurance is actually for both Mother and Child - and rather than just lasting the brief aftermath of the birth, it's actually up to the 1st Policy Year. So in addition to lasting over 3 years, payouts and coverage includes:
1) Hospital Care
2) Congenital Diseases
3) Pregnancy Complications
4) Phototherapy (usually)
If you and your child have the misfortune of claiming the entire sum assured across the 3 year period in hospital care and phototherapy (or god forbid, the congenital diseases or pregnancy complications), the ratio of premium to claim in that situation is usually about 1:20, 1:19 [or about $500+ for $10,000 in coverage].
3. Many Options
Back when Maternity plans were new, and even at the recent Babyfairs - what I'd been hearing was that there was reluctance to buy a Maternity Plan due to the necessity of bundling it with an ILP. Thankfully, you have a much wider range of bundled plans now, with as cheap as a simple Term Plan or Hospital Plan.
Or you could get a standalone. The gist is, there are many bundles or combinations to choose from, from many different companies, which Budget Babe summarized really well here. There's also quite a range to claim from, depending on which company you choose.
If I were looking at disease alone: a lot of babies develop jaundice, which is often treated by photo-therapy, which is usually offered by insurance companies.
By a lot, I mean the statistical majority of all children born, which is terrifying to me.
Do note that terms and conditions (especially in relation to the severity) apply.
Maternity Insurance is clearly not my specialty, but I've enjoyed learning more about it over the last 9 months.
As a consultant and a consumer, I really believe that a 1) one-time premium for a 2) 3+ year coverage for 3) both my future wife and unborn child, while also 4) guaranteeing my child's future insurance is a completely worthwhile purchase.
It's a small price to pay to protect something so precious.