It is increasingly common that parents purchase a medical policy for their baby when born. Is medical insurance necessary for a baby or child below 18? If yes, what sort of coverage is required? What else should we be aware of?
What is Child Insurance?
Child coverage can be bought immediately when your baby is 30 days old. For child below 18 life insurance policies, the life assured would be the baby but the proposer would need to be a parent (either father/mother). Existing congenital conditions will not be included (see full list of inclusion/exclusions). Life insurance medical costs for the entire family should cost less then 10% of your net take-home pay.
What Coverage Do Children Need?
Medical coverage is a must have coverage nowadays for private hospital coverage. This is as a single major illness hospitalization bill can be high running into above 5 figures.
Other common coverage areas are:-
Death & Total Permanent Disability (TPD) coverage: Usually not important especially as a child would not have dependents. However, death/TPD coverage is often very cheaply available especially for young healthy children. There is a minimum basic sum assured (death/TPD) that must be purchased for most modern policies.
Critical Illness (CI) coverage: More important than death & TPD coverage as provides much needed funds if a Critical Illness occurs. An often forgotten fact is that while medical coverage pays for the medical expenses directly to the hospital, CI coverage provides funds directly to the parents for use at own discretion. This can be used for alternate medical treatment (e.g. overseas) or any other purpose. A note as well that you can only purchase CI coverage up to the matching amount of death/TPD coverage.
What are the differences in a “standalone medical card” versus “medical coverage with life policy” (as a rider)?
A standalone medical coverage only covers medical costs (which is the most important thing). However, medical coverage as part of a rider would allow you to obtain CI coverage, payer waivers (i.e. no longer required to pay if the payer dies/suffers from TPD/CI) & allows for better medical coverage plans (e.g. higher annual/lifetime limits, more extensive coverage).
If planning for the child’s coverage to be long-term, it may make sense to obtain better coverage with a medical coverage with life policy as it gives a significantly higher annual limit & an option for unlimited lifetime claims. This is especially in view of rising medical costs (~10% globally, 15% in Malaysia).
What does it mean on capacity of minor to insure? Does it mean that a child/infant below age 10 cannot get life insurance?
“A minor who has attained the age of ten (10) years but has not attained the age of sixteen years may take up a life insurance policy on his own life or on the life of another in which he has insurable interest with the consent of his parent or guardian. A minor who has attained the age of 16 years may also take up a life insurance policy on his own life or on the life of another in which he has insurable interest. Both may assign the life policy on their own life or take an assignment of a life policy with the consent of a parent on guardian.”
The capacity of minor to insure means that the life assured (person insured) can be a minor BUT the policy owner cannot be a minor (needs to be an adult).
- Policy owner: parent
- Life assured: minor child
Insurable interest: There needs to be linkage of resulting financial hardship on the person (or object) for the policyholder. To exercise insurable interest, the policyholder would buy insurance on the person or object in question.
Policy assignment: The transfer of ownership from the policy owner (Assignor) to another person (or institution aka Assignee).
- Most importantly is to get a medical card with at least RM150 daily Room & Board (preferably RM200 above R&B). A standalone medical card costs ~600 (girl) to ~800 (boy)
- Depending on budget, obtaining a minimal amount of Life, TPD, CI coverage & payer waiver would be beneficial too for a baby/child. Costs are affordable from 150/mth to 300/mth (private hospital room). The policy would provide an increasing amount of coverage while costs remain low when purchased when young & also have a cash value which can be withdrawn when needed.