At the age of 31, many of my friends are entering parenthood. And that includes me! I’ve been meeting up with my friends discussing what kind of financial planning they should do for their baby. From my point of view, insurance planning for babies should be done in the following priority:
- Hospitalization insurance
- Whole life insurance
- Education insurance
Hospitalization insurance
This is the low cost yet the most important insurance you should get for your baby. Last year, I did a near $12,000 hospitalization claim for a baby.
What’s the reason for his 11 days of (not consecutive) hospitalization? Viral flu. The baby can’t cough out phlegm and needs the help of equipment. My client was so glad that bill was fully covered!
Babies can be admitted to hospital for common ailments that are insignificant to adults and parents will not think twice giving their child the best medical attention.
Hospitalization insurance can be paid through CPF, cash or both. You should consider programs that are of “as-charged” basis. It means claims are paid according to the hospital bill as long it does not exceed the yearly or lifetime limit of the plan.
Whole life insurance
Unlike us where we got an income to protect and dependents to support, your baby does not. So is it still necessary to insure your baby?
Definitely!
And here are some reasons,
- Cost. The earlier you start your newborn’s insurance, the cheaper it is.
- Coverage. Some children develop conditions such as asthma in the latter years. Therefore, purchasing an insurance plan early will let your baby enjoy the fullest coverage without any exclusion.
The toughest part of buying whole life insurance for your baby is deciding the insurance coverage amount. Here are few suggestions for you to determine the insurance coverage,
- Buy within your comfortable budget or
- The cost of giving birth to your baby including medical cost, income loss, final expenses and so on.
You may need to discuss with a financial adviser to tailor a program that is most suitable.
Education insurance
I believe it is every parent’s dream to see their child throwing that square hat into the air to celebrate their graduation from University. Ok, before your dream and drift further, let me warn you…
University fees are not cheap!
With fees growing at about 4% per year, it is going to be a huge sum 20 years later. Education planning allows you to develop a systematic and organized way to accumulate funds through instruments that can grow in tandem with the school fee growth rate.
Some factors to consider includes,
- Which university you want to send your baby to
- How many years before your baby enters university
- Will the planning be done by cash or CPF?
Do not forget to plan for yourself
Which is more important? The golden eggs or the goose that lays the golden eggs?
It might seem obvious but a lot of parents are so engrossed in planning for their newborn but neglected their own insurance planning.
Remember, you put the bread on the table. It is always important to ensure that your family is well taken care of financially, even when you are not around.
Let’s enjoy our parenthood!
