Baby insurance: What's worth buying for your newborn?

Thinking about what kind of insurance your newborn needs (if at all)? We give you a breakdown of the common types of insurance to consider for your baby, some advantages of getting policies early, plus a few plans to consider.

To some parents, getting insurance for their newborn is natural and expected. To others, the mere suggestion may elicit a response that goes something like “why do babies need insurance?”

That is a good question. Here are the four most common types of insurance people are buying for their newborns (and why):

1. Health insurance (Integrated Shield plans) – To complement MediShield Life coverage for a higher quality of care.
2. Critical illness insurance – To compensate for loss of income should one or both parents be forced to take time off work to care for their sick child.
3. Personal accident insurance – To cover outpatient treatments and other “miscellaneous” medical expenses.
4. Whole life insurance – As a “forced savings” plan to be able to pass on cash value to their child plus give them coverage for the rest of their lives.

3 advantages to covering your newborn earlier rather than later

Now, we cannot say whether getting these types of insurance for their newborn might be the best move for you.

Each family’s financial situation is different and so is their investment philosophy (for instance, there are those who consider whole life insurance to be a subpar method of savings/investment).

But the list above should give you at least a sense for why some parents would elect to get such insurance for their baby.

And while it’s true that all these insurance types can be purchased later in a child’s life, there are advantages to purchasing these policies early – three of them in fact. They are:

1. No pre-existing conditions

Most babies are born perfectly healthy, which means there are no pre-existing conditions which would then become policy exclusions. Covering them early thus provides maximum coverage from an illness perspective.

2. Lower premiums

The younger you begin policy coverage, generally the lower premiums you pay (especially if there are no pre-existing conditions). For medical insurance, you can also use your MediSave funds to buy an Integrated Shield plan for each child.

And if you opt for whole life insurance, many such policies have a limited pay term, after which the policy owner will be protected for life.

Buying this policy young – and getting lower premiums in the beginning – could save you thousands of dollars in premiums over the term.

3. Peace of mind

Don’t underestimate the importance of obtaining peace of mind. Raising a family can be a stressful experience. Knowing that your downside financial risk is limited by insurance can go a long way toward alleviating some of that stress.

Insurance policies for your newborn: What to consider buying

We’ve looked at the common types of insurance people typically buy for their newborns and some advantages of starting early. Now, here are our top insurance plan picks for each of the above categories.

Keep in mind that many of these have overlapping benefits, which means that it might not  make sense for even the most devoted parents to purchase all four types of insurances for their child – no matter how precious.

Integrated shield plan: Great Eastern SupremeHealth

With four different tiers available, Great Eastern SupremeHealth is highly flexible.

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From only Class B1 wards and lower at restructured hospitals (Standard plan) to all wards including at private hospitals (P-Plus plan), it can cater for a wide range of financial circumstances. Premiums for a child who is one year old and above start at $157, up to $299 a year.

Now, although it does have multiple tiers to choose from, this isn’t the fanciest plan.

But for the levels of benefits it offers, such as claim limits as high as $1.5 million as well as 120 days pre-hospitalisation and 365 days post-hospitalisation coverage, the premiums charged offer excellent value for money.

And considering the costs of raising a family these days, this is why we selected this plan for this specific context.

(Note: To be eligible for this plan, your newborn has to be at least 15 days old.)

Critical illness plan: AXA SmartCare Junior

AXA’s SmartCare Junior is a hybrid critical illness and personal accident plan (with a focus on the former), designed specifically for the young ones. The plan covers ten critical illness, with lump sum payouts ranging from $20,000 to $50,000.

While that doesn’t seem like very much, it also offers coverage for in-hospital expenses from $2,000 to $5,000*, $200 to $500 in medical expenses stemming from accidental injuries, and the same lump sum pay-out for the accidental death or total permanent disablement of the payor.

All these make its annual premiums, which range from $135 to $339, a much more value for money proposition.

All things said, while this isn’t a strict critical illness plan per se (we said there would be overlaps), it is a good “all-rounder” option that can complement MediShield Life or Integrated Shield Plan coverages.

(Note: To be eligible for this plan, your newborn has to be at least 15 days old.)

*Only applies to the eight conditions covered: Hand, foot and mouth disease, Chickenpox, Measles, Kawasaki disease, Dengue hemorrhagic fever, heatstroke, food poisoning and acute appendicitis. 

Personal accident plan: Sompo PA Junior

This is a personal accident and infectious diseases plan (covering 17 of them) that is also focused exclusively on children.

But what we like about this one is its daily hospital allowance (up to $100) and its expanded scope for what covers ‘disablement’.

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For instance, fractured arms and legs (that permanently affects normal functionality) entitle you to a payout equivalent to ten per cent of the sum assured, and third-degree burns give up to the sum assured.

The two higher plan tiers also offer lump sum payouts up to an estimated 30 per cent of the sum assured for post-accident reconstructive surgery. 

Its infectious disease coverage is also only available to the two higher plan tiers and includes daily hospital allowances, get well benefits, and medical expenses claims of up to $1,500.

This plan has three tiers, with annual premiums ranging from $86 to $289, making it a cost-effective option for parents with an accident-prone child.

Whole life insurance plan: AXA Life Treasure

As we mentioned earlier, one of the main benefits for buying whole life insurance for a young child is that – thanks to flexible premium payment terms – you could conceivably ensure your child is protected for their whole life by the time they reach adulthood.

For instance, if you buy a whole life insurance and fully pay the premiums over 10,15, or 20 years, then by the time they enter the working world, they will already be covered for the rest of their life with no more premiums to pay.

In this respect, AXA Life Treasure provides one of the most flexible premium payment terms on the market. You can pay the premiums over 10, 15, 20, 25, or 30 years and you can even choose to pay it on a monthly, quarterly, semi-annually, or annually. 

Furthermore, you can also add on multiple riders to cover a host of critical illnesses – including early-stage diagnoses and juvenile conditions – as well as the multiplier benefit rider which allows you to multiply the sum assured on your policy. This can turn it into a truly comprehensive policy.

This article was first published in SingSaver.com.sg.