Two years ago, I found myself particularly irritated with a client who was approaching his forties with little life insurance.
He had three children, a housewife, a fourth on the way and for lack of a better word, REMARKABLY LITTLE life insurance.
I reviewed his family’s portfolio, fully determined to draw out a viable insurance budget so they could be better protected - and found a considerable amount of monthly spending in one particular area.
It was a life insurance policy for each child.
The rationale for purchasing it was that he would have something in the event one of them died, and if not, it could just be treated as savings for them.
Some math promptly corrected this notion, much to his surprise – and I repeatedly pointed out that he was the priority, not his children.
Perhaps my irritation showed - but telling a loving father very tactlessly and aggressively that he has to put himself over his children is typically not a good sales move.
(And you have to remember that Money Maverick was considerably more inexperienced at the time… Especially at the sales part)
Needless to say, we didn’t do business that day.
Does your child EVEN NEED Life Insurance?
My specialty is in Critical Illness.
I can tell you about how many more critical illnesses affect young girls than young boys, at what statistically likely age – and how it affects parents and children alike.
Imagine your child starting university 3 to 6 years later than everyone else, and needing to work 3 to 6 years more so that you can send them to said university while they continue being dependent on you.
Imagine not having the money for personalized treatments for the small, vulnerable life in your hands.
With such insurance described as ‘risk transfer in the event of a catastrophic event’ - the Critical Illness Policy is so dreadfully important, so that such a large amount of money will give your child a cushioning for the future.
On the flip side, I would say – and many agents would agree with me to some degree – if your child dies, it doesn’t affect you nearly as hard financially because your child doesn't provide income. If YOU die, it affects your entire family far more.
Someone who produces an income is far more important and needs to be covered first – as hard as it is to hear.
So… Does your child really need life insurance?
Do you even need to buy life insurance for that child?
As you can imagine from reading above, it was hard for me to understand why a parent would put so much emphasis into the child’s insurance. Your child does not have an income to replace, after all.
But with a few more years of experience, I’ve finally figured out reasonable reasons for why your child would, and SHOULD have life insurance (on top of their Critical Illness and Hospital plan, of course).
1) It Could Guarantee Their Future Insurability
Insurability here refers to the RIGHT to purchase insurance, especially in the face of medical underwriting.
What I’ve observed from experience is that as we get older and our health worsens – we no longer have perfect health, but we also might not incur something as drastic as a Critical Illness right away.
Chronic pains and conditions are common. Perhaps a small surgery, or an injury to the organs.
In particular, young children are prone to accidents or various sicknesses that we rarely experience as adults (such as chicken pox).
All these little things potentially compromise the ability to purchasing life insurance at a standard rate, or worse – at all!
By purchasing just a small life insurance plan with such a specific feature, it preserves their ability to purchase insurance in the future even if their health declines – a value which is really tremendous.
I will emphasize - any plan bought before 2017 would NOT have this feature for yourself or your children.
Some of these features help specialists like myself determine comparison factors to make better recommendations for you, not just on price alone.
2) It’s a Real Possibility.
Mortality statistics for young children (under 5) per 1000 in Singapore have been going down substantially. So why would your child need insurance?
While most of us would be quick to attribute such a statistic to factors like our strong healthcare system, you have to take additional context - births also dropped from 1.96 to 1.14 in that same period.
This suggests that modern medicine has only reduced the possibility of death by that much – and if you raise the age for mortality statistics just by a few years, that number would be far higher. [E.g. Below 12 years old]
As a plus, life insurance is MUCH more affordable for your child now than it was 20 years ago due to such statistics.
3) You Need Time to Grieve
I’ve never been a parent, but interactions with my clients, my niece and fellow consultants have given me a little more insight into this – particularly, William Seah (thanks).
Once a child gets sick, parents tend to just drop everything to tend to this child. Project deadlines be damned and emergency leave days be fully used – a good parent will put their child’s urgent needs above their less urgent ones.
If you’re a parent whose child has died – imagine what you’ve had to go through.
What would urgent even look like anymore?
The sheer willpower just to get up from bed, let alone go back to work the week after due to something as ridiculous as debt necessities would crush me, personally. Not to mention the things that really need to be done – funeral arrangements, for example.
If your household has a gross income $100,000 (including CPF) a year and your child dies, leaving behind an insurance amount of $100,000 – that’s less than a year to grieve and adjust, especially after paying the necessary costs for a proper goodbye such as any remaining bills and final expenses.
But it’s much, much better than not having it.
4) They Could Afford It
The stance on prioritization doesn’t change.
Adults are instructed to put their own air mask on before their children on a flight. Not because airlines are heartless, but adults are in a much better position to help themselves and their children when they’re not suffering from hypoxia.
In contrast, children are much more unlikely to be able to do this. And they would be far more helpless if you’re gone.
So you have a lot of priorities to cover before your child’s life insurance.
Your own, for example. Your mortgage, so your spouse doesn’t get saddled with debt on top of becoming a single parent. All of your hospital and critical illness insurances.
But eventually, if you have that ability to afford it and you can, you should.
Again, much better than not having it. READ ALSO: Maternity Insurance is an Absolutely Must, Here's Why
5) It’s a Gift
Lastly, bearing that you’ve nailed the other 4 points successfully – it’s a gift.
Even after you’re long dead and gone, years down the road, your child will have something that protects them.
It is a long lasting representation of your love and provision.
It’s a little different from something immediate, like an education.
And especially when it comes to Point 1 - you’ll have something for your child that lasts well after graduation without shelling out more for it.
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