If you didn't know, it can be very hard to be professional about Child Insurance.
I'm very fond of children, so you would think it's a no brainer - but it can work against you. I've been seeing parents lay it all out on the line for their kids and neglect themselves.
Financial Consultants like myself are stuck with the unfortunate dilemma of:
a) Selling Child Insurance in crazy amounts to loving parents who may not even have settled their own insurance yet (with obvious potential repercussions and conflicts of interest), or
b) Selling Parents on NOT purchasing Child Insurance before settling their own insurance first.
...Naturally, in the best case scenario this reduces the budget that they wanted to spend on their child, and in the worst case scenario you piss off a parent for offering them good advice.
If you have kids or a niece as cute as mine, I can really understand the desire to protect. But we can do it in a slightly more efficient manner:
1) Ensure that as parents, we have the adequate insurance to keep providing for our family in unfortunate circumstances
2) Purchase Insurance for our child AFTER (1) and prioritize the order of which we get it according to our very limited budgets.
Here's a Complete Guide to Child Insurance, in order of purchase...
1) Maternity Insurance
This is the first thing to get. I've written about Maternity Insurance before, so I won't elaborate too much on it. In a nutshell, you really want the Maternity plan for two main things:
1) Assisting the Mother in Financial Aid during complications (because really, money is the last thing she needs to worry about compared to her health or the health of her baby)
2) Preserving some of the Child's future insurability in the event that they are born with pre-existing or congenital diseases.
Without this, you run the risk of your child never having the right to purchase insurance, or at least - insurance at an affordable price.
I am not a specialist in Hospitalization Plans, but any Consultant worth their salt will probably tell you its the most important plan anyone can have. Its the first one that your child should have once they secure a degree of insurability and health.
Statistics support this: in fact, to a MUCH larger capacity than I even knew!
Look at this:
More than 3 out of 10 children Aged 0-4 required admittance to the Hospital in 2017. This frequency of admittance drops severely after Age 4 and continues to increase very gradually after Age 9.
The implications are severe: the only age group with a higher level of hospital admittance is AGED 75 AND ABOVE - which tells you a tremendous amount about the frequency of children requiring hospital administration.
If you're a first time parent whose child is running a fever that just won't go away at 2 or 3am, I think you know what I'm talking about.
Personal Accident Plan
A detailed study in 2005 showed that in Singapore, injuries are the fifth leading cause of death for all ages*. Those results are likely consistent today.
Additionally - if age-specific mortality rates for injuries are examined, injuries rank as the leading cause of death in the preschool, school and young adult age group(1)*.
I think any parent with a child would not find this surprising. But for those of you who don't like confronting that morbid and tragic possibility, you'll still likely want your child to have coverage not just for painful accidents, but for a range of 'accidental' diseases that tend to afflict children more.
Prominent examples include Food Poisoning, Dengue Fever and Hand-Foot-Mouth-Disease - which are not that uncommon amongst children. Some are literally labelled 'Juvenile Diseases' under some plans.
With an Accident Plan, you'll have your child's bills paid off by insurance from a policy that is extremely affordable, rarely costing more than a few dollars a month.
Critical Illness Insurance/TPD
Critical Illness may seen unusual on the list as Children do not typically generate an income that require replacing.
However, there are severe opportunity costs for your children not having this particular insurance.
Firstly, parents usually will take extended lengths of time off work to care for their children regardless of a helper in place. This could present potential income costs in advancement of their work, or even require them taking long leaves of absence.
Secondly - your children will likely be extremely uninsurable, which makes it difficult for them to purchase Insurance in the future. Or they would require far more capital outlay for that risk transference (in English, its hella more expensive)
Lastly - your children's life trajectories are likely to be slowed down.
If it's Early Stage Cancer at a young age (for example) and the family is fortunate enough to fight it off completely after 2 years, your child still enters Primary 2 as a 10 year old instead of as an 8 year old. That eventually results in your child entering the workforce and starting a career much later than his or her peers.
Not to mention the physical and mental effects of having had to fight off the Critical Illness to begin with.
Developing early resilience is generally a good thing, but ideally not at the cost of my child's physical and mental well-being to such a severe degree.
You may want a CI policy to overcome this - because most young people I know would love to enter the workforce later - IF they had a tremendous amount of savings from insurance claims to compensate for it.
As it turns out - Life Insurance is the last of the insurances that I consider that your child needs out of all the insurances they should get first.
This surprised me as well, but it really shouldn't have. Parents have a tremendous amount of expenses and insurances before they start to fork out additional expenses on insurance for their children.
While your children will certainly need life insurance in their lifetime, its not the largest priority out of all the things that will cost you - the paying parent - out of pocket. That's primarily because children do not typically have a high financial value till they get older. You may still need Life Insurance.
Most parents, and marriages by extension - are rarely unaffected by the sudden death of child and may require mourning time, on top of dealing with the long term effects. It would be surprising if ordinarily high performing workers were completely unaffected at their job should they lose a child, and this can create a serious loss of personal income on an already tragic situation.
This can be better detailed in this article below.
...If you can afford it.
The last two years has made it very clear to me what a huge blessing children can be. As parents or society as a whole, it's our duty to protect them and help them get the best that life can give.
That being said, it must never come at the cost of compromising your role as a provider and your own personal priorities. Someone who gives all his money to charity and becomes unable to fend for himself is not useful.
Similarly, as hard as it is to say - Financial Planning should be a priority for providers before looking at protecting children.
At least now you know what may be more important to purchase in order - once you actually have the spare cash.
As one of the Top Financial Bloggers in Singapore (Feedspot, Withcontent.co), I would be happy to answer any emails and questions you may have, as I have been doing for my readers over the past few years - especially about Insurance and Investing, as it is my forte of personal and professional knowledge.
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Money Maverick is a Licensed Financial Consultant with MAS, who specializes in Investments and Critical Illness Insurance.
The views on his blog are strictly of his own opinion and have no affiliation to any of the companies he works with.
Here are some of my resources on:
3) Retirement and Leverage: Leveraging a Private Annuity, Pros and Cons (ft. Jamus Lim)
4) Spending and Saving: The Biggest Spending Mistakes You DIDNT Even Know you were Making (and how to avoid them)
5) Job Assessment: A Case Study on How a $6k/mth GIrl makes MUCH more money than a $10k/mth Guy
6) Financial Optimisation: How I Avoid the Largest 'Fees' of All
1) Childhood injuries in Singapore: a community nationwide study M M Thein, B W Lee, P Y Bun - Singapore Medical Journal, 2005*
2) Manulife Ready Protect Product Summary. The resource is used as an example and is not Financial Advise nor a recommendation to purchase a specific product.