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 consultant 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.
Insurance companies often throw in freebies to lock in the parents/child from young as a marketing strategy. Heartland Boy has compiled a list of freebies that parents of newborns should not miss out in this article.
Hi Heartland Boy,
I’ll also be buying the H&S Plan and PA Plan but I am still mix about buying a WL with CI coverage. Are you able to share how Baby Bonus took care of the premiums and is it all or partial?
I am also thinking of how to set up a educational fund for my child and will love to hear your thoughts or from your next post.
Cheers!
Hi Derek,
I apologise if i have caused some confusion. I mean the first-year premiums. I am personally investing her angbao monies which i hope will be her education fund in the future!
I’m also interested to know how the Baby Bonus can take care of all the premiums. If it is just $8,000, I’ll be interested.
Hi Vince,
First year premiums taken care of by the $4,500 dispensed by the govt. Apologies if it wasnt clearly written.
Hi Alison, able to share your thoughts on buying a WL plan over Term Plan for your little one? Given the popular BTIR method, are there any merits to do this also for a baby? Though i recognise a WL for a baby is pretty “worth it” in the sense it covers for 60 plus years since its bought early. Thanks!
Hi Andrew,
If you are looking at a term plan per se, maybe it is not necessary for a newborn since there is 0 dependents? I would just take all the premiums to invest. However, I got a whole life instead as i wanted to endow her with a gift after i have finished paying her premiums. It is just enforced discipline compared to “Invest the Rest”. It’s more of a preference 😀
Hi
Could you share which health insurance plan plus rider did you purchase after comparing the various available ones?
Also, could you also share which personal accident plan you purchased?
Thanks.
Regards
Keith
Hi Keith,
I got the AIA Health Shield Max A (with Max Essential A Saver) and the Manulife ReadyProtect Accelerate (with Child Care Benefit). Hope it helps
Thanks! Do you mind sharing why these 2 over the others? What factors did you look into in coming up with this purchase? Appreciate your sharing.
Hi Keith,
H&S policies are largely similar across the board but i was told that AIA probably have the strongest panel of doctors. As for Manulife PA, i really like its Child Disability support allowance rider. It pay 10% of the sum assured for 10 years if the child suffers a PA that cause the insurer to pay out 50% or more of the sum assured. This help to defray rise in living expenses down the road due.
Nice Article on Baby Insurance!
Thanks!
Hi Heartland boy, are you able to share how you buy which whole life plan you bought with a early critical illness coverage? How does it work? Is it payable for 25 years only? Thank you.
Hi Phyllis,
I bought a AVIVA Whole Life with Early CI rider. Yes, i stop paying premium after 25 years. These are called limited pay whole life- you pay for a fixed no.of years but the coverage is for life.
Hi heartland boy, so the Aviva whole plan is limited payment for 25 years but the rider is also limited pay or pay for life? Thank you
Hi heartland boy, so the whole life policy is limited pay but the rider also limited pay or pay for life? Thank you
Hi Phyllis,
The rider is limited pay if i am not mistaken.
Hi Heartland Boy,
Thanks for this useful article. I remember in your article of maternity insurance, you chose NTUC and GE. I would like to understand why you didn’t choose a whole life plan from either of them as your baby will not need to go through medical underwriting (or simplified)?
Hi Geraldine,
Thanks for your compliments. you have an excellent memory. I didn’t go for those plans because my agent did a comparison and illustrated why AVIVA was cheaper. In addition, i need not worry about underwriting because my baby had a clean bill of health (except for catching the flu bug from us) during the purchase. hope this clarifies.