This Is For Your Newborn Baby: Should You Get Whole Life or Term Life?
Whenever this topic is discussed amongst our community, we always end with very differing views on life insurance for your newborn. These differing views can be placed into these 3 categories:
- I will get whole life insurance
- I will get term life insurance
- I will not get life insurance
When comes to financial planning, there aren’t one-size fits all insurance portfolio that one takes on and one would automatically be adequately insured. There. Is. No. Such. Thing.
Choosing between Whole life or Term life insurance would be the THIRD STEP in planning to insure your child, so if you have not done step one and two, please do so before considering this!
Disclaimer: This post is not sponsored, therefore all opinions here are unbiased.
In the end, it all boils down to your affordability, if one is able to afford every aspect possible to fully-insure their child, that’s great. If not, you ought to prioritise the type of insurance to get base on how much you are able to afford.
It is important to:
- Set aside money for insurance expenditure;
- Plan for which insurance plans to take on
It is very important so that you will not let it set your budget.
A Summary of Scenarios
|Scenarios that resonates with you||What should you do?|
|I want to gift it my child||I will get whole life insurance for my child|
|I want to lock in their insurability|
|Insurance is cheaper when they are younger|
|I want to clear their premium payments earlier and enjoy longer coverage|
|I want my child to be protected against Early Critical Illness (ECI) and Critical Illness (CI)|
|I am not able to afford whole life at the moment but would still wish to cover my child - as a temporary solution||I will get term life insurance for my child|
|I want to ONLY cover my child for Early Critical Illness (ECI) and Critical Illness (CI) with term insurance|
|As my child has no dependants, |
I feel it is not necessary
|I will NOT get life insurance for my child|
1. I will get WHOLE Life Insurance for my child
- I want to gift it to my child
- I want to lock in their insurability
- Insurance coverage is cheaper when they are younger
- I want to pay off their premium payments earlier and enjoy longer coverage
- I want my child to be protected against Early Critical Illness (ECI) and Critical Illness (CI)
Whole Life Insurance for your child as a GIFT
Many of my peers are really glad that their parents did plan their insurance when they were young.
Knowing that their base is covered, adding on to their coverage with term insurance (when they are older) would be much lower.
For example, if you believe that $500,000 coverage on your life is sufficient for your current lifestyle at age 30.
It would be easier to fulfil that with a whole life plan gifted by your parents as illustrated below.
|I Have a Whole Life Insurance of $100K||I Do Not Have a Whole Life Insurance of $100K|
|Add on Term Coverage||400K||500K|
Chen Zhirong – “Personally, I feel very fortunate that my dad choose to buy a limited whole life plan for me shortly after I was born. If he gave me a bunch of stocks right now, it would not give me the same peace of mind. Instead I would have to start studying/worrying about them.”
Locking in their insurability from young
Many are uncomfortable with the uncertainty of the future. By protecting their child from a young age provides parents with the ease of mind for any unforeseen circumstances, which ensures that they remain insurable as they grow old.
Some might say this is ‘fearmongering’, but isn’t insurance that as a whole? You are paying for “protection” in monetary terms against your greatest fear – death.
Viki Tong – I have friends whose kids are diagnosed with cancer. I doubt they can buy life insurance again for the kids even though they’re now in remission. Hence, if budget allows, can consider getting one for them while healthy.
Bernard Tay – The key is insurability of the child when he grows up and requires the life insurance for his own dependents. If he is likely to be healthy (PES A/B type) then really there is no need. He/She should buy his term life insurance when he has dependants. But if there is family history for medical conditions/ chronic diseases which may only manifest later, then the parents should consider whether it is useful to get the life insurance early. Not necessarily at birth. Of cos affordability is another factor.
Insurance coverage is cheaper when they are younger
I personally prefer insurance with a limited pay option, meaning that I only have to pay my premiums for a fixed number of years, sometimes 15 or 20 years but thereafter, I stop my premium payments but I still remain covered till age 99.
Here we include a case study on how much you more you are paying for starting late.
|Whole Life Insurance||Getting Insured at a YOUNG age||Getting Insured when you are OLDER|
|Premium (per year)||$973.00||$2,134.00|
|Premium (per month)||$81.08||$177.83|
|Premium Term (years)||20||20|
|Total Premiums Paid||$19,460||$42,680|
|Product||Tokio Marine TM Legacy Lifeflex (Basic with CI)|
*Data obtained from DIYInsurance.
$23,220 more. By helping your child start early, you are paying mortality charge for their entry age, and in this case, it would be 2 years old.
I want protection against Early Critical Illness (ECI) and Critical Illness (CI)
By adding on ECI and CI coverage with the whole life insurance policy for your child, you are able to protect your child in any case of critical illness till age 99 but by paying for a limited number of years.
Protection against ECI and CI provides with your family money to cope through if either parent has to stop work to care for your sick child.
Gan Khing – If a kid unfortunately gets ECI or CI, I would think one parent (in a double income family) would likely quit or take no pay leave to look after the kid. The coverage could be used to cover the parent’s loss of income and any expenditure.
2. I will get TERM Life Insurance for my child
- I am not able to afford whole life at the moment but would still wish to cover my child – as a temporary solution
- To ONLY cover my child for Early Critical Illness (ECI) and Critical Illness (CI) with term insurance
Unable to afford Whole Life Insurance at the moment
As mentioned in the previous article, this is another option if you are unable to afford whole life insurance for your child at the moment.
Some term life insurance will allow you to convert to a whole life insurance plan but do check with your financial advisor for insurers that provide this convertibility feature.
Wei Quan Soh – If you think that whole life is too expensive for you now, maybe can consider to take up term life first when they are young because it can be converted to a whole life without medical underwriting in the future if you wish or when they reach adulthood.
Tan Siak Lim – If you can’t afford to pay for whole life, you should consider getting a 5 years renewable and convertible term, so that you lock in the insurablility to convert when you are financially able to.
To ONLY cover my child for Early Critical Illness (ECI) and Critical Illness (CI)
3. I will NOT get any Life Insurance for my child
Some of us would feel that life insurance is not important since there is no one depending on your child for income.
Alan Kor – If no dependents, need life insurance for?
‘Nuff said if you feel this way. To each his own!
This list of scenarios is definitely not exhaustive. However, we hope this has helped you in one way or another in deciding which type of life insurance you should get for your child, or not get one at all!
I would personally prefer if I was gifted whole life insurance from my parents fully paid for, haha!?
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