Saturday, January 4, 2014

Some thoughts on buying Insurance for your Child


My kid is now close to 2 years old. Most of us go through a learning process being parents, definitely reading and talking to people helps a lot, however there are some things that we just learn, adjust and fine tune along the way, wouldn't you say?

One of the key things we usually consider is to get insurance for our children. Below was my thought process. Feel free to comment or share other ideas.

I took Takaful Malaysia for my son. Somehow I am little paranoid so each of us have a different company, myself AIA, wife GE, and my son TM (Takaful Malaysia).
Some considerations for myself when choosing insurance for my son. 
·        Life insurance should be nil or a minimum. Articles online suggest people who have a lot of tanggungan (liabilities) should have a good amount of life insurance. Children are our tanggungan (our liability) and don’t really have tanggungan. I still took a minimum Life Ins since for RM10 per month can get around 35k coverage.
·        Hospitalization cash / allowance, i.e get paid $ for each day hospitalized. I took this cause I am thinking generally most of our hospital bills would be covered / claimed under company, so at least can claim some allowance from our personal insurance
o   Need to check if can claim insurance from company but still claim hospital allowance from our insurer.
·        Payor plus (or whatever its called) – i.e if anything happens to payor (ourselves) they kid’s insurance policy renewal will still be paid by the insurance.
·        Income tax (Malaysian Income Tax) – I believe education ins & medical insurance fall under same category, so having an education helps get good tax relief also.
·        Personal Accident / PA – for myself AIA didn’t know should take or not, but for wife and son we have taken. I think next year I will update my AIA for PA too. For around $2 per month, I think the PA is worth it, unless you already take additional PA with your car insurances (e.g Alliance Road warrior). Interestingly not many people take PA, nor many agents push / recommend PA, I’m not sure why. - anyone any idea?
·        Most people say don’t take insurance with investment link. My thoughts
o   I tend to agree.
o   Why I took – TM only had investment linked one (no fixed return or FD type).
o   But oklah, so far their fund seems to be doing ok, but to be fair, in 2013 Malaysian stock exchange was very positive, so expected. And they have a fair amount of funds I can choose from and the prospectus claims free switching.
·        Maybe consider prudential takaful, I think they have yearly cash payout also if no claim, TM used to have, but seems none already
Also consider until how many years does it cover especially medical, TM is up to 70 I think.
o   I think I might have heard of policies (education insurance policy) which are to cover until the child starts working , going college or 18 years, however IF there is no option to extend the medical coverage post that age, I think too risky, as could be diagnosed, then e.g at 18years no more coverage

Why I chose takaful, one as above, don’t want to put all eggs in one basket. Also has hosp. allowance, Islamic, it clearly shows the agent commission in the simulation and I liked that they (or the agent) were willing to send me each simulation scenario I asked for (if you would like to take a look, leave me a comment).

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