Baby insurance: Milk powder - check. Insurance plans for baby?

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Milk powder, check. Insurance plans for baby?

 https://www.straitstimes.com/business/invest/milk-powder-check-insurance-plans-for-baby?utm_campaign=STPicks&utm_source=whatsapp&utm_medium=social-media&utm_campaign=addtoany

2024-06-23

Alyssa Woo

Assistant Business Editor 

The conventional wisdom is for people to start young when getting insured as it could cost too much to do so after they develop conditions, when one could even become uninsurable.

But I didn’t bargain for how early it can get – when the baby is still in the womb, in some cases.

Because that bundle of joy can also be a bundle of bills. Some may not think insurance necessary, but unless one is able to pay out of pocket for surprise hospital bills ranging in the tens of thousands, insurance offers a cushion of sorts against such financial setbacks. It is a long-term expense that parents need to budget for, and based on my experience, one that would-be parents should budget for as early as possible.

But Google “What to get for a newborn baby” and you’ll find yourself inundated with what baby carriers or pacifiers to buy.

Articles meant for first-time mothers also often focus on gynaecologist visits and the milk powder, clothes and nursery items prepared in anticipation of the child’s arrival.

What insurance plans to consider for the baby are rarely top of mind for first-time parents.

Is it enough to have company insurance? Must I add on riders? The Straits Times speaks to experts to find out the minimum coverage needed for your child.

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What to buy and when

To start off, first-time parents should look at their existing medical insurance to see if there is adequate coverage for the mother and child (spoiler: there likely isn’t).

For those with company insurance, it is best not to rely on it alone as it is not permanent, and coverage can be lost once the parent leaves the firm.

Broadly, there are three different types of insurance to consider: An Integrated Shield Plan, which is an optional upgrade by private insurers of the basic MediShield Life component run by the Central Provident Fund Board; one that covers critical illnesses; and one for personal accidents.

All Singaporeans and permanent residents already have some protection as they are automatically covered by MediShield Life, a basic lifetime health insurance scheme which can be paid with MediSave funds. It is meant to subsidise treatment in public hospitals and covers Class B2 and C wards, with a maximum claim limit of $150,000 per policy year.

The Integrated Shield Plan is the optional add-on component to MediShield Life, and can be purchased from a private insurer. This is commonly referred to as the hospital plan and helps to increase the coverage of costly medical bills, and includes Class A and B1 wards.

Then there are maternity plans, which are meant to protect both the pregnant mother and child and covers critical illnesses. It can either be purchased on its own or as an add-on to existing insurance policies, and starts as early as week 13 of pregnancy.

Ms Irma Hadikusuma, chief marketing and proposition officer at AIA Singapore, encourages parents to buy insurance for their children before they are born, because doing so after birth means they will be subject to underwriting.

Underwriting is a process which determines the risk of insuring a policyholder, which is higher when one has an underlying health condition, such as hyperthyroidism. Should a condition develop before the insurance plan is bought, it is regarded as a pre-existing one and is likely to be uninsurable, she says.

With a maternity plan, the baby is guaranteed coverage even if he or she is found to have any of the insured birth defects – or what insurers call congenital illnesses.

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Mr Eddy Lim, head of propositions and portfolio management at Great Eastern, says not every pregnant woman buys a maternity plan, based on the company’s statistics. He adds that those whose first pregnancy went well and who are having a second or third child end up not buying pre or postnatal insurance, as they think they will be fine.

“They should plan with the same consideration as with their first pregnancy. While the mother is confident of her health and is fine, the first 14 days for the baby are a really big question mark,” he says, adding that the most common neonatal condition is jaundice.

“Not many people realise that the real value-add of a prenatal plan is the neonatal part. An Integrated Shield Plan does cover pregnancy complications, but it starts 15 days after the child is born.”

Maternity plans generally also cover things such as outpatient phototherapy for babies with severe jaundice as well as stem cell treatment, and give payouts if a child is diagnosed with developmental delays later. Lump-sum payouts are also made for certain pregnancy and childbirth complications, if conditions are met. Specific terms depend on the plan and insurer, so be sure to check with an insurance representative.

These maternity plans are bought before the child’s birth, and depending on the plan, becomes a whole life insurance plan when the mother transfers the policy over to the child. These are typically bundled with critical illness and savings plan components.

Mr Lim says: “In terms of postnatal insurance, we observe that more parents stop there, when their baby comes out healthy and they plan to do an insurance review for their family later. We encourage customers to buy a whole life plan for their child as early as possible, while they are still healthy.”

The priority is to have adequate hospital and medical coverage for the baby, but not all parents may be able to afford buying all types of insurance at the same time. If you have only the finances to get one plan for your newborn, consider making the Integrated Shield Plan a priority. Hospital plans can be bought for babies as early as 14 days after birth.

Personal accident plans can come later – when your child starts walking or is of school age, for instance. These plans cover a whole host of things related to accidental injuries, death and infections, including food poisoning, dengue and hand, foot and mouth disease.

Hospitalisation plans focus more on covering hospitalisation needs and stays, and generally do not cover the entire medical bill. In this case, parents might consider opting for a rider to help cover deductibles and coinsurance (subject to at least 5 per cent copayment), and to reduce their out-of-pocket expenses, says Ms Hadikusuma.

Still, adding on riders does increase the premiums – it is important to be honest about whether the total payments might strain your finances too much.

Investment-linked insurance plans can wait, if your budget does not allow for them.

Mr Ng Wen Jie, an agent with one of the big insurance companies, says: “It is more important to work within your means. Settle the risk part first and get the hospital and critical illness plans before doing a savings plan, if your finances allow you to do so.”

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The monthly premiums vary according to a number of factors, which include but are not limited to the type and level of protection coverage, and your financial budget set aside for protection.

Parents who buy whole life plans from Great Eastern tend to go for a sum assured coverage of between $100,000 and $200,000, says Mr Lim. It is an amount parents are comfortable financing, with an average monthly payment of $300, or $3,600 yearly. Payment periods can either be over a lifetime or a fixed number of years.

Mr Ng says he has some clients who pay $2,000 a year, while others pay up to $4,000.

“Let’s say covering a sum assured of $300,000 plus premium waiver riders comes up to maybe $3,000 and that’s too much, then reduce your sum assured to perhaps $100,000 or $50,000. Financial plans can be done in stages. It’s okay to cover a minimum sum and then build up from there. As long as you have coverage, it’s better than nothing,” he says.

He adds: “If parents really want to save money and go with the cheapest premium, choose the highest multiplier and end it early – at least your kid is covered in the early stages. Once they reach an age when they earn their income, then let them take over the insurance plan.”

If you are still on the fence about getting hospital insurance for your child, Mr Ng stresses the importance of thinking ahead. “All you need is that one time when your kid gets into the hospital for a serious illness, and then you can’t buy a hospital plan.”

Buying insurance? Here are 7 common terms you should know

Sum assured – the guaranteed amount your insurer will pay to the policy’s nominee in the event of the policyholder’s death.

Multiplier – meant to boost the coverage of your insurance during your working years until you are either 65, 70 or 80 years old, depending on the plan. Coverage will drop to base amount after that. A higher multiplier means paying higher premiums. If a policy has a sum assured of $300,000 and a five times multiplier, the total payout will be $1.5 million if the policyholder dies before age 70.

Deductible – a fixed amount of money a policyholder needs to pay each year before the insurance plan covers the rest.

Copayments or coinsurance – Terms may be used interchangeably depending on insurer, but it essentially means the share of the claim as either a fixed rate or percentage, after paying the deductible. If a medical expense is $100, and your deductible is $30, you will split the remaining $70 between yourself – if share is 10 per cent, $7 – and your insurer – 90 per cent share, or $63.

Annuity – when the insurance company makes payments out to the policyholder either in the form of a lump sum payment or instalments.

Riders – add-ons to a basic insurance policy that includes either benefits or amendments, typically to provide more coverage. Adding on riders comes with an additional cost.