Why you may need more than an Integrated Shield Plan for your child

I'll just have to purchase a hospital plan for my children to cover their 'medical bills'. I don't need to benefit from their payout, and I don't think they'll encounter anything serious that'll impact their lives. I'll leave it to them to cover the rest when they grow up.

This is a common thinking among parents and I could understand from their point of view as they haggle with other costs such as child care and enrichment classes. In this post, I'll dive deeper into the statement above and examine the parts where these statements are true, and also to discuss the potential downstream problems that parents are exposed to.

Integrated Shield Plans (ISPs) are like the commandos of the army - usually the first line of defense to react when a child is admitted to a hospital - amidst one that requires at least a day surgery, admission to a short stay ward or a general ward. In most cases, they'll cover the bulk of the bills, subject to the specific policy terms of coverage and certain general exclusions - which we'll not touch on today.

If you've covered your children until here, congratulations to you as you've limited your exposure to the most obvious and immediate possible expenses that you may incur!

Protecting yourselves against high medical costs is one matter, covering for possible living expenses is another.

What if a potentially life-threatening medical condition such as cancer strikes? In most cases, the ISPs will still be able to take care of the bulk of the medical bills, barring certain situations or if you'd prefer to travel overseas for treatment. But if this happened to your children, wouldn't you or your spouse want to spend more quality time with your child, to provide emotional support? Personally, I spent quality time with a family member who've had cancer, and as a caregiver, having to handle the emotional stress is real. If a grown-up needs emotional support, I don't see why a child wouldn't want to have your undivided attention, especially during the period of emotional and physical pain.

If this happens, wouldn't it reduces your household income and increases your household expenses? On top of that, you wouldn't know for how long you'll be caring for your child and this could potentially leave a big gap in your finances.

That's not all. What if the serious medical condition requires long term medication? The ISPs only cover for medical bills if any of the three conditions above are met. Some of us have the impression that medication is covered in ISPs and it's true to a certain extend. It is covered under the post-hospitalisation benefit, but there is a limit on the maximum duration of claim. Think long term medication as supplements to keep the medical condition in check. With ISPs increasing clamping down on unauthorised hospitalisation just to claim for tests and medications, chances are these will unlikely be covered in ISPs.

What about serious medical conditions that may lead to long term care? These will be trying times for the family. If any one of the parent is going to take care of the child full time, chances are the household income will drop accordingly, and in most instances, expenses will increase as well. This'll definitely have a hit in your long term finances, and eventually you'll have to settle for something lower.

In recent times, there is an increasing need for initiatives such as the Arc Children's Centre - designed to give children with critical illness a safe and welcoming space to rest, learn and socialise to not only help the little ones, they're also there to provide support and options for their caregivers.

Now that we've looked at the potential problems, what're some ways you can do to protect your finances?

Here are my 2 suggestions you can consider:

1. You can 'self-insure' by setting aside a lump sum that provides full liquidity to cater for this scenario. You can hop around fixed deposits from different banks to earn some interests.
2. Go for an Early Critical Illness coverage for your child to largely reduce this risk. This way, you can release the funds that you're supposed to set aside above, and safely invest your excess cash that was supposed to be 'locked-up'. The mechanics of this coverage can be in different forms, and you can go for one suits you better.

In fact, if they were to get into a critical illness plan early, their health and young-age premium will be locked in, ensuring that they have a base cover for them to fall back on even if they were to have any future medical conditions that may interfere with their insurance application when they grow up. You might want to avoid having a coverage that ends when your children reach 21 years old as it doesn't lock in their health for long term coverage, and after this age, they'll be back to square one - akin to leaving them out to dry.

As much as we expect children to grow up well and fine, much like most of us, the risk of exposing our finances to medical costs, caregiver expenses and other long term costs is something that you might want to consider reducing. Much like personal insurance, covering comprehensively for your children can be a crucial piece in your personal finance.