For many people, insurance is one of the basic building blocks of a financial plan.

And many argue - none more than those in the insurance industry - that "the earlier, the better".

But just how early in a person's life should one start buying insurance?

According to insurer AIA Singapore, a case can be made to start before a child is born.

Recently, AIA launched a pre-natal insurance and savings plan that provides protection for expectant mothers.

The coverage extends to the baby after birth and includes babies conceived through in-vitro fertilisation.

Its features include pregnancy complication benefits for the mother, and coverage for some congenital illnesses that the baby might suffer from.

A new policy with similar cover can be purchased without any medical underwriting within 60 days of birth for the baby, with the transfer of policy cover from mother to baby.

According to Mr Eddy Lim, head of protection and saving proposition and marketing at AXA Singapore, some of the common claims for children are for injuries suffering while playing sports and games, viral infections, and treatment for congenital illnesses.

For parents, it is all rather baffling, with insurers rolling out so many new and different products aimed at children.

Mr Peter Siong, vice-president and head of the sales division at NTUC Income, said the amount of insurance to obtain for children depends on the desired lifestyle, expectations and affordability.

"My recommendation for a child is, at the minimum, a health policy to cover hospitalisation and surgical expenses, a savings policy for the cost of education and other future expenses, a plan to cover critical illnesses as well as a personal accident policy to guard against mishaps," he added.

Parents should see to their own coverage first

Should I buy life insurance for my children?

There are two schools of thought on this.

Some people believe that purchasing life insurance for children is unnecessary, given that there is no need for income replacement.

For those who prefer some form of coverage but are unwilling to make such a long-term investment - whole life policies end only on a child's death - there is the option of term insurance.

Great Eastern chief product officer Lee Swee Kiang pointed out that term plans have no cash surrender value, unlike whole life plans.

This means that if a 10-year term plan is bought for a child, who then lives beyond 10 years, then the policy expires without any money returned.

Term plans tend to be much more affordable.

Mr Lee said: "Depending on budget and objectives, parents should select something suitable."

While death benefits may not be essential for children, others believe that there are merits to buying a life insurance policy at a young age.

AXA's Mr Lim explained that in buying life policies for children, the advantage of buying life insurance while a person is healthy comes into play.

"If the child has no existing conditions, he will not have any issue of insurability.

"However, if the child develops a new condition unexpectedly in his growing years, the medical history will follow him for the rest of his life and make it difficult to buy life insurance cover in the future," he said.

Other protection plans: Hospitalisation and surgery, critical illness and personal accident

In the unfortunate event that your child needs to undergo surgery, hospitalisation expenses can take out a large chunk of your savings, so experts believe such plans are a must.

For a start, Central Provident Fund members can insure their immediate family members, including children, under MediShield.

The premiums will be paid with the applicant's Medisave funds, and the children will be individually covered under the scheme.

However, do note that MediShield plans provide coverage only up to certain hospital ward classes, and those who prefer private hospitals, for example, will have to take up extra Shield plans with private insurers. Those premiums can also be paid for with Medisave funds.

The five vendors for these Shield plans are NTUC Income, Great Eastern, AIA, Prudential and Aviva.

Mr David Ng, vice-president and head of marketing at Prudential Singapore, said it is best to buy this as soon as your child is born.

"Illnesses or accidents may strike at any time, regardless of age, so early coverage ensures peace of mind," he said.

Personal accident claims are also quite common, given that children tend to have boundless energy.

Mr Ng said fractures are a commonly overlooked area.

"Children are prone to accidents, and when they fall, their bones are often affected," he added, explaining that most personal accident plans cover only very serious fractures or burns.

However, PruFracture Care offered by Prudential pays out if the child suffers from a hairline fracture or a dislocation.

Neo-natal plans

Prudential was the first insurer to launch a neo-natal plan, in 2010, which extends coverage to pregnant women and their foetuses.

The plan covers pregnant women against pregnancy complications as well as death, while also providing coverage for the yet-to-be-born baby for congenital illnesses and hospitalisation.

In 2010, about 9,000 babies were hospitalised for congenital and neo-natal conditions in subsidised wards at public hospitals.

Even though they were in B2 or C class wards, some 700 ran up bills that came to more than $5,000.

Mr Lim said advances in diagnostic technology allow the early diagnosis of congenital illnesses. Parents recognise that protection for their children therefore also needs to begin early.

AIA Singapore chief marketing officer Ho Lee Yen noted that while most health or hospitalisation insurance plans also cover congenital illnesses on a reimbursement basis, a neo-natal insurance plan complements such plans by providing a lump-sum benefit if the child is diagnosed with congenital illnesses.

How much is enough?

Mr Lim said that a general rule of thumb is that coverage for children should not exceed $500,000.

One thing to take note of is that paying for insurance premiums for your child may put a dent in your disposable income, so it is important that parents get their own coverage sorted out first.

"The parents' coverage levels should be higher than the child's for obvious reasons, that is, while it is important to plan for your child, it is equally important to review the parents' own coverage to ensure it is sufficient," said Mr Lee.

songyuan@sph.com.sg

This story was first published in The Straits Times on May 12, 2013

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