WELCOME to parenthood!
First things first, make sure that your child has medical insurance. You can get one as early as when your baby is 15 days old. With this, you don’t have to worry about any hospitalisation expenses that your child might incur in their growing years.
As a new parent, you now have the additional responsibility of bringing up a new person in your life.
So while you do not need to buy anything beyond medical insurance for your baby, you need to buy other insurance to ensure that your child will continue to have financial support as he or she grows up, come what may.
So here are the additional insurances for new parents to take up:
- Life insurance for the working parent
- What would happen in the most unfortunate situation of you or your spouse dying prematurely while your child is still growing up?
- If your family depends on the income of that parent, then supporting your child will be a struggle for the surviving spouse.
At a bare minimum, you should get life insurance for the working parent. If something happens to that parent, the surviving parent has a cash lump sum to draw on to support your baby’s growing years.
How much life insurance should you get? You should get enough to cover the living expenses of your family and the future education of your children.
Data from our direct online life insurance service Fi Life indicated that our policyholders take out an average of RM750,000 of life insurance coverage and about 60% of policyholders obtained the maximum coverage of RM 1 mil. This will go a long way towards ensuring the financial security of your family.
Depending on your age, health and lifestyle, a RM 1 mil policy can cost as little as RM60 per month for a 30 year-old mother or about RM108 per month for a 30-year-old father.
Total and permanent disability insurance
There can be no worse situation for a child than a parent dying, right? Actually, there is. It’s worse if the parent suffers total and permanent disability through an accident or disease.
In this situation, not only the affected parent cannot work and is unable to contribute to the family income, but his spouse must also have the financial resources to take care of him. It’s a harsh double whammy.
That’s why total and permanent disability (TPD) insurance is crucial for new parents.
Thankfully, most TPD insurance is packaged with life insurance and is very affordable.
Medical insurance for all members of the family
In addition to medical insurance for your new baby, you also need medical insurance for all members of your household: For you, your spouse, your other children and even your parents. Private healthcare is very expensive these days, and you can never predict when any of your family members will need it.
A good hospitalisation and surgical insurance plan will protect you from any financial shock caused by hospitalisation.
What insurance should you not get?
You might get approached for other insurance policies. Here are some that are not necessary:
Life insurance on your child’s life
Absolutely not needed. You do not financially depend on your child so any cash paid on the death of your child is not necessary. Further, no amount of cash will ever compensate you for the grief caused by the loss of your child.
Education plans that combine savings and insurance
These are usually savings or investment plans that are combined with insurance for your child.
While it is important to build an education fund for your child, there is no need to link it to insurance. Keep your investments separate from insurance, otherwise, your education investment fund will be handicapped by hefty commissions.
We already outlined what insurance protection products you need as a new parent. Once you’ve done that, you can go ahead and buy pure investment products like unit trusts or exchange-traded funds separately. You can also invest your funds with a digital investment manager which will automatically invest your child’s education funds for you.
If you are unsure of how to invest, consult a licenced financial planner from the Financial Planning Association of Malaysia (FPAM).
Here’s a tip: If you want to build an education fund for your baby, consider Simpan SSPN Prime, an education savings scheme guaranteed by the Malaysian government. You get tax relief on contributions of up to RM8,000 every year and you get an annual dividend on your fund too.
In conclusion, as a new parent, you will need to adjust your insurance plans to make sure that your new baby and your family will be taken care of should there be any mishap.
Medical insurance for every family member and life and TPD insurance for you, the parent. Once you get these, you can enjoy a worry-free new life as a parent.
Happy parenthood! – May 28, 2023
Malek Ali is the founder of Fi Life and a CFP professional at the Financial Planning Association of Malaysia (FPAM). Fi Life is an approved participant of the Bank Negara Malaysia Regulatory Sandbox offering direct-to-consumer life, critical illness and accidental death insurance policies.
The views expressed are solely of the author and do not necessarily reflect those of Focus Malaysia.
