Written by Singlife | 03 Sep 2018 |
Naturally, new parents wish to protect their newborns, but what are the important insurance plans you need to protect your new family?
How can you spare your family (including key members such as breadwinners) from having to deal with unexpected financial problems which could arise from an illness, injury or accident?
To answer the above questions, consider the following plans for your loved ones to stay protected.
When you get pregnant, one of the first insurance plans you should consider should be a pregnancy plan. This is a special type of life insurance plan that covers both the mother and child for common pregnancy and birth complications.
The duration of this plan is typically short; for the mother, it begins in pregnancy and terminates upon childbirth. At this point, the plan transfers to the baby, and can last anywhere from 2 to 6 years.
Some insurers offer parents the option to convert the pregnancy plan to a life plan upon expiry, allowing them to continue protecting their child. If you decide to buy life insurance for your child, make sure to choose a plan that includes a future purchase option, guaranteeing insurability during adulthood.
A pregnancy plan is a cost-effective way to protect against pregnancy complications that can inflate your medical bills. This can help save you from having to dig into your pockets to pay for the portions of your pregnancy not covered by your Medishield/Medishield Life plan.
Some insurers also bundle pregnancy plans with endowments or life insurance policies, making it convenient for you to start your child’s financial plan. However, if you believe your child should start their own financial planning only upon reaching adulthood, opt for a standalone pregnancy insurance plan.
With a new addition to the family, the role of the breadwinner becomes even more crucial than before. Between baby supplies like diapers and formula, and accessories like bottles, clothing, walkers and toys, you’ll be facing a constant drain on your bank account.
And not to forget, this will be in addition to all your regular expenses, such as mortgages, loans and instalment plans you may still be paying for.
Experiencing a loss of income during this time can be especially stressful, especially if it is due to a serious illness or a fatal accident.
Indeed, this is one of the most compelling reasons to sign up for a life insurance plan – the guarantee of income replacement, which allows your family to carry on in the face of catastrophe.
Just like a Whole Life plan, a Term Life plan provides a financial safety net that can save your family from going under.
However, a Term Life plan offers two major advantages over the Whole Life version – flexibility and affordability – and it is these two factors that make it particularly suitable for new parents.
A Term Life plan is flexible – it lets you choose how long you want to be covered for. This means you can get the cover you need, without making a long-term commitment. Furthermore, many Term Life plans offer guaranteed renewability, which lets you renew your plan at your convenience.
A Term Life plan is also affordable, owing to much cheaper premiums. This feature allows new parents to get the insurance cover they desire without spending too much money.
A Critical Illness (CI) plan is an insurance plan that pays out upon diagnosis of certain pre-defined conditions. It is meant to pay for treatment and hospitalisation fees, which can be exorbitant, depending on the severity of your illness.
Under certain conditions (such as when combined with a hospital plan) a CI plan can also be used to fund your recovery period, during which you may not have the ability or inclination to go back to work.
By default, CI plans are paid out only when the disease reaches a late stage, but there are options that allow you to get part or all of the payout at earlier stages. This so-called “accelerated CI” or “early CI” plan is preferable because early treatment often accords a higher chance of recovery.
CI plans are often sold attached to a life insurance plan, working together to provide a larger safety cushion to you and your family in the case of a major illness or serious health condition.
However, if your existing life plan does not have a CI rider attached, you may opt for a standalone CI plan to boost your protection.
A CI plan provides an additional layer of protection to your family. It qualifies you for an additional payout in case a serious illness strikes.
New parents can easily obtain CI cover by attaching it as a rider to their life insurance plan. If your quote for CI cover is too high, you can opt for lower coverage levels to bring down your premiums.
Disability cover is a type of insurance plan that provides benefits should a disability render you unable to work. Should this happen, you will receive payouts to help fund your living expenses.
Depending on your specific disability plan, you may receive either monthly payouts for the period of your disability (or up to a specified age), or a lump sum payout. You may also receive other additional benefits to help pay for rehabilitation sessions, or even a lump sum payout in the event of death.
Disability cover provides an alternative source of income when temporary or permanent disability prevent you from working. This is helpful in situations where you become unable to continue in your previous occupation, and can supplement any other payouts you may have triggered.
However, do note that maximum monthly payouts are capped at 75% of the salary you reported at the time of application. Hence, do remember to update your insurer regularly as your income increases.
While CI and Disability plans provide cover upon the occurrence of certain health-related events, an Accident and Hospitalisation (AH) plan is focussed on helping you pay for any medical treatments and/or hospital stays and visits.
It is important not to confuse a CI or Disability plan for a hospitalisation plan. Neither is it advisable to try and use CI or Disability plans to cover any hospital costs you may incur.
This is because the benefits gained from your CI or Disability plan may be exhausted by your medical bills, leaving you or your family with little to no funds for your daily expenses.
Also, your CI or Disability benefits may take a long time to be disbursed, affecting your ability to pay off your hospital bill. This can create additional stress for you and your loved ones.
Out of all these plans, an AH plan is perhaps the easiest to attain. This is because most of us already have a Medisave plan, and upgrading to a Medishield Life plan is a solid step towards getting proper AH coverage.
Think of your AH plan as something to prevent or reimburse your out of pocket expenses, in case you need extensive medical care.
Be aware that AH plans may still require you to foot a portion of the hospital bills, hence do make sure you always have some cash in hand.
An endowment plan is a forced-savings type of insurance plan that is designed to help you save money for the future. The goal is to grow and accumulate a lump sum through a combination of regular deposits and investment returns.
With their emphasis on savings, endowment plans are designed to be safe investment instruments that provide stable returns.
Another feature of endowment plans is their fixed duration. Unlike other types of insurance plans, endowment plans pay out at the time they mature, or when you surrender them. The amount of payout you receive is affected by various factors, including withdrawals, loans and performance of the market.
Well, we all know that the key to saving money is actually putting that money aside. An endowment plan is a good way for parents to automate the process of saving money, which is crucial in meeting future big-ticket needs, such as an overseas university education at a prestigious institution.
You’ll want to time the maturity of the endowment to coincide with expected milestones, such as when you child turns 18 or 21, to ensure a timely payout.
Do note that endowments are a long-term commitment, and early surrender will often result in a financial loss (i.e., what you get back is lower than the total paid-up premiums). If in doubt, start with a smaller amount, and top up the endowment when conditions allow.
Not every new family will need all 6 of these insurance plans. Before you commit to a purchase, you should review your policies, and if you find any gaps, plug them with the appropriate plan.