Planning to buy additional term insurance with CI rider. How much term insurance + critical illness, should I cover myself (39yrs old), now that I have 1+yr old child and might plan for another?

Hi,

I would suggest a term coverage to at least cover your balance amount of your housing loan and ideally a term period to at least your retirement age of let's say 65 yrs old. Since you already have a 100k life insurance with CI coverage, I would say you might not even need to attach another CI rider to the term plan unless you have more than enough budget for it.

Instead, I would suggest you to increase your coverage in other areas such as Income Protection plan and Personal Accident plan which you are currently lacking.

Income Protection plan is actually the second most important insurance plan to get after your ISP. It is to insure your ability to earn an income, it covers your monthly income as long as you are unable to work due to illness or injury resulting in a loss or reduction in income, up to retirement age. So in the case of CI, your ISP will cover for the treatment costs while Income Protection plan will cover for your monthly income during the treatment period where you will most likely be on long term MC. Your life insurance will pay out the $100k too hence the reason why the additional CI rider is not really necessary to get. It is also alot cheaper compare to CI plan.

Personal Accident plan is also good to have, it provides coverage from major injury such as Total Permanent Disability (TPD) to minor injury such as spraining of ankle or even breaking of tooth while eating. One key benefit of a Personal Accident plan is the high coverage at an affordable premium.

After that, you should also consider planning for your child's insurance needs. These are the type of insurance that you should consider for your child:

1. Integrated Shield Plan

2. Personal Accident Plan

3. ECI coverage

Personal Accident plan is important because kids can get into all sorts of scrapes, injuring themselves or worse. And as there is no guarantee that young children won’t develop major illnesses, the ECI coverage is there to act as an income replacement for you or your wife if one of you decided to leave work to look after the child. And to be honest, this is also the best time for your child to get an insurance because of their age and health. The premiums will be cheaper at your child's current age.

So in conclusion, I would suggest your term plan to cover your housing loan balance and look into increasing the coverage in areas that you are currently lacking and also to consider planning for your child's insurance needs.

Feel free to contact me (email at bio) if you are interested to find out more.

Cheers.

Hi anon,

You will probably want to ensure sufficient money to cancel your mortgage as well as provide for your child (and perhaps 2) for at least 25-30 years (we won't know when the second kid will come along), as well as some money for the surviving spouse and to support your parents. So the typical rule of thumb of 10x annual income doesn't really apply here since we have more detail about your situation.

This is really a very subjective thing and it depends on the person's views and perspectives. For example, I have seem a husband buy a term insurance to cancel the mortgage, his two kid's expenses in raising them, as well as take care of his wife's retirement. So if nothing happens, both husband and wife will continue to work. If he passes on, the wife can immediately stop working and be a full time mother to the two kids.

Some figures to consider:

• How much will it cost to raise a kid? Estimates vary but can go from $6K to $12K/yr, before education costs are factored in (which can be at least $50K per child)

• How much will your wife need to retire if you want her to be a full time mother? This requires an indepth conversation with her. Alternatively, even if she is open to be a working mother, some provisions need to be made to lessen the financial burden on her.

• Do you plan to upgrade your property later on? If you do, have an idea of what your future mortgage might look like and how long you can continue to realistically service the mortgage

• How much do you need to support your parents, and for how long? I'd play safe and provide for allowance beyond the typical life expectancy (perhaps till age 90)

When you know the answers to these questions, both in terms of the number and duration, you will then be able to have an idea of how much coverage you need, and for how long.