Pregnancy Insurance – Is it really necessary?
In the past month, I celebrated the birthdays of my 2 beautiful daughters. The older one who looks exactly like daddy just turned 6 and the other who behaves exactly like the “mum-me” just turned 4. I don’t have to tell you how many times me and my husband looked at each other and remarked “I think she grew up again” which is our sign to mean that the girls have just done something that gave us that “wow” feeling.
It’s easy to forget that one of my girls had to spend a few extra days in the “High Dependency Ward” when she was born (resulting in the hospitalisation fees ballooning to almost $10,000) and the other was termed “high risk” for a genetic disorder during the 20th week detailed scan. I’m grateful that both are growing up normal and healthy. This indeed is the only real wish I believe every parent truly have in their hearts.
Besides being a mother, I am also a financial planner and part of my work is to help clients with their insurance needs. One of the most unusual times to discuss insurance with clients is during their pregnancy. Talking about all the things that can go wrong during a time of obvious joy and happiness is something I have not yet and will probably never get used to.
Yet, from my personal and professional experience, there is a cost to not talking about it. One of the very common insurance to consider is what is generally known as “Pregnancy Insurance”. It is a type of insurance to buy during pregnancy to provide financial protection for both the mother and the soon-to-be-born child. In fact, this insurance can only be bought as early as the 13th week of pregnancy for some insurers and latest on the 40th week of pregnancy (some insurers don’t even offer after the 32nd week).
It can be quite a complex insurance to understand because it’s not an easy to grasp concept like hospitalisation insurance.
To help you perhaps get a better handle on this, here are my 3 “Need to Know” about Pregnancy Insurance.
1. It covers conditions that are not nice to talk or think about during pregnancy
Here are some examples of the conditions being covered:
For the Child:
- Down’s Syndrome
- Cerebral Palsy
- Cleft Palate/Lip
- Club Foot
- Congenital Cataract
For the Mother:
- Still Birth
- Fatty Liver of Pregnancy
- Uterine Rupture
- Postpartum Haemorrhage requiring Hysterectomy
I guess I don’t have to elaborate anymore. That is why this type of insurance is always a difficult discussion with an expecting mother.
2. There are many versions
There are at least 5 insurers offering this insurance and they have unique offerings such as cover for IVF pregnancy, twins/triplets pregnancy and stand-alone or bundling options.
There is a saying that “No two pregnancies are the same, even when the parents are.” Ok, I’ll admit that this is my common saying because I had 2 very different experiences with my 2 girls. The point is, if pregnancies are often different experiences, the type of insurance protection should be flexible and considered rather than “one-size-fits-all”.
While having so many versions can make it a daunting task to choose the most appropriate plan, it is actually a really good thing. For example, if you have an IVF pregnancy, you should not be buying a basic plan that does not cover IVF even if the premiums are lower. On the other hand, if you are carrying twins, you would want the coverage to cover both and not one child. Or perhaps, budget is tight and all you want is some basic protection, you should choose one that fits this requirement.
Also, you can bundle the pregnancy insurance with an investment, savings or life insurance plan to start financial planning for the child early. It really depends on what you want and in short, you can save money and have something more appropriate because that is what options can do for you.
3. Your child is guaranteed to be able to buy insurance
What? Does my child need a guarantee to buy insurance? I thought that as long as I have the budget, I can buy insurance?
Because most of us have good health, we take it for granted that we can buy insurance at any time we want as long as we have the money. In reality, it does not work that way. You need both money and good health to buy insurance. In other words, if you have a lot of money but not good health, you can’t buy insurance.
In my opinion, both personal and professional, the most valuable feature of the Pregnancy Insurance is what is known as the “Guaranteed Insurability Option”. This means that you can transfer the insurance you bought to the child after birth without any insurance underwriting or assessment.
This is a complicated option as there are terms around how much you can transfer, what type of coverage to transfer to and when the transfer can be done to enjoy the guaranteed insurability. This should be discussed in detail with the financial planner at the point of purchase.
What is important to understand is why this is important.
On average, the maximum amount you can claim from the pregnancy insurance (known as the “sum assured”) is $10,000. Some insurers have lower amounts and some have slightly higher amounts options. While having the insurance is good, not having it is not financially fatal. In most cases, it would not put a family into a position of complete financial ruin.
One the other hand, using the example of one insurer, a child can be covered up to $200,000 on a guaranteed insurable basis when born. The child can even be insured for critical illness.* This is possible even if the child is born with pre-exisiting medical conditions. For example, with a hole-in-heart condition and the potential need for a major surgery in the future is expected.
Besides Medishield-Life (compulsory for Singaporeans and Permanent Residents), there is no other insurance that a child born with such pre-existing condition can reasonably expect to buy. This is when the rubber really hits the road. How do you prepare financially for a future of medical and lifestyle unknowns with only a basic medical insurance?
For a parent faced in a situation like this, this guaranteed insurability option is priceless.
A few Clues about how to Decide
The cheapest way to have the pregnancy insurance is to buy it “stand-alone” by purchasing the basic option without bundling it with an insurance policy. However, such an option will mean that there is no option to transfer and enjoy the guaranteed insurance option for the child. While you are guaranteed the $10,000 of insurance for yourself now, you lose the opportunity to guarantee the $200,000 of insurance for the child later.
While we should not get into a “crystal-ball syndrome” and start predicting the future, we should think about this sensibly and make as good a decision as we possibly can. At the end of the day, it’s about managing risks and here are 3 clues to help you decide on the need to have this insurance:
- Age – Ask your doctor and he’ll probably advise that it’s best to have children as early as possible. Age is a factor that can increase pregnancy risks to both the mother and the child.
- Family History – I always make it a point to ask my clients about their family health history. Genetics play a part and in some cases, this is the reason people chose to buy pregnancy insurance.
- Ask your Heart – I’ve learnt that not only are pregnancies different, people are different. Some clients are “cool” with not having the insurance and it does not affect their pregnancy mood. Others want to have the plans ready for the ‘just-in-case” scenarios before they can enjoy the pregnancy with a peace of mind. The most important thing is that the mother must feel totally supported and happy so ask yourself if this is something you feel absolutely necessary especially if budget is a consideration.
It is worth remembering that most pregnancies will be happy, joyful and at times, tiring affairs. Insurance is not the only decision to worry about. Recently, I did out of my own interest a calculation of how much it would cost financially from the 20th week of pregnancy to when the baby celebrates the first month. This is probably the time when “baby stuff spending” is at its high gear.
If you are having a baby, my heartiest congratulations and I hope this Baby Budget Checklist will help you in planning through your pregnancy journey. Click here to download the Baby Budget Checklist.
(NOTE: Get our Baby Budget Checklist to find out the estimated costs of big ticket items from 20 weeks pregnancy to baby 1st month. Get your checklist here)
*Pre-existing condition may be excluded
Article by Lee Meng, FChFP