Are you shopping around for a policy for your child? Here are a few things to know before signing on the dotted line.
Insure yourself before buying a policy for Junior
Daniel Lum, product and marketing director at Aviva Singapore, says you’ll be better able to take care of Junior if you are taken care of first. “Your child is completely financially dependent on you and your spouse.
So it makes sense to first ensure that there’s a financial safety net for him, in case you’re not able to provide for him anymore.” Term insurance plans are a relatively affordable way to get covered for death, critical illness, terminal illness, and/or total and permanent disability ,he says. There are a number of options available, so shop around to find one that suits your needs and preferences.
A hospitalisation and surgical plan should be your priority
You should start thinking about insuring your kid as soon as he is born, says Daniel. As health problems are unpredictable, this will ensure that any new medical condition that subsequently develops will be covered. “We have the national Medishield Life scheme, which provides basic medical coverage for all Singaporeans and PRs. You can also purchase Integrated Shield Plans offered by private insurers,”
Daniel explains. “Do consider the quality of health care you expect for your child. You should purchase a medical expense solution that is appropriate for the type of hospital – whether government or private – and the type of ward you’d like him to receive health care at.”
Understand the differences between “deductible” and “coinsurance” features
A deductible is the initial portion of claims made in a year that the policyholder needs to pay for, before receiving any claims’ payout. Co-insurance is the percentage of the claims that the policyholder co-shares with the insurer. “You should weigh your out-of-pocket costs against the premium for the insurance plan,” Daniel advises. “If the concern is to reduce out-ofpocket medical expenses, you may wish to purchase riders to cover the co-insurance and deductible portions.”
When buying an education policy, the sooner the better
The earlier you start, the more time there is for your savings and investments to accumulate. Alfred Chia, CEO of financial advisory firm Singcapital, estimates that tuition fees for a four-year university degree in the UK, plus living expenses, will cost about $333,347 in 20 years’ time. You would have to save $1,070 every month for the next 20 years in order to accumulate that amount – this is based on a savings rate of 2.5 per cent.
The kind of education policy you invest in depends on your risk profile. “If you have a low investment risk appetite, an endowment plan would be suitable, however you’d have to save more per month,” he points out. “An increasingly popular option would be putting the savings into unit trusts. There are various unit trusts with different risk reward profiles.
For example, an individual with a low-risk profile could invest in a fixed income unit trust. “Someone with a slightly higher risk profile could opt for a balanced unit trust which invests in both equities and bonds. If you are very risk tolerant, you could opt for unit trusts that invest only in equities. You can start with as little as $100 per month and all savings are fully invested from the onset. You can also stop saving any time without penalty.”
