Is life insurance an option for my child?
Dear Consumer Line, I am 43 years old and have a beautiful bouncing threemonth-old baby girl.
My worry is that I have a hereditary disease and she too may suffer from it in the near future. Should I buy life insurance for my child?
Lindokuhle Miya, Amanzimtoti, Kwa-Zulu-Natal
Dear Lindokuhle, Insuring children is one of the toughest decisions for families as parents often find it hard to overcome the guilt associated with such a decision. Basically, the real reason for life insurance is to replace somebody ’ s income. So buying life cover is not ideal for your little one.
Rather buy a cover that builds up cash value you can tap into such as an endowment or an education policy. They are good investment tools and do not lapse as a life cover would. Consumer Line spoke to Lee Bromfield, the CEO of FNB Life, who says you can buy a funeral cover for the entire family instead of a life cover for your daughter.
He says insuring children should be seen in the context of financial planning in families. Even though children do not generate any income, the truth is that they are still exposed to all forms of risks such as illness and accidents.
In your case, because you have a hereditary disease, he says you can take a single funeral policy that covers up to 21 family members. Bromfield says this option can cover your immediate family and extended family. He says the good thing about this type of cover is that children are predominantly low risk so you are unlikely to feel major financial impact by insuring them. He says a family could pay R6.30 for a R10 000 cover per child.
Ike Diale, a final planner at Momentum, says most insurance companies will not insure a baby. There must be insurable interest when taking such cover and its not determinable for a child as he/she is not working. He says there must be a beneficiary. So it ’ s better to take a funeral cover, endowment policy or any other investment. With a funeral cover under group scheme, the child is automatically covered.