What the expert says
MARRIED couples in their 40s with young children will need to pay attention to their protection needs while building their wealth.
Ms Winnie Wong, director of sales at Manulife Singapore, offers tips on how to do so.
PROTECTING THE FAMILY
In general, I recommend that a breadwinner should have a protection amount equivalent to at least 10 years of his income. In the event of illness or premature death, the family will be taken care of. It is also important to have medical and hospitalisation coverage in place.
Parents can take up protection policies for their children to give them a head start. It's good to start young as the premiums are lower, and to "lock in" the protection when one is healthy.
When a person has a medical condition, he will have to pay much higher premiums and, in many cases, he cannot be insured.
Parents can take up a payor benefit with critical illness rider, which can be attached to the child's protection and education plans.
If misfortune befalls the parents, such as a critical illness or premature death, premiums for the policies will be waived.
This means that the insurer will pay the premiums on the parents' behalf and the child can continue to have the protection and funding for his university education, as planned by his parents.
Parents can also assign the insurance policy to their children when they turn 21.
A person should assess his risk profile and financial goals when building his wealth.
It is advisable to invest in financial instruments - such as unit trusts or investment-linked funds - at a regular pace. In this way, he will benefit from dollar cost averaging as this reduces the risk of investing large amounts in a single investment at the wrong time.
I must compliment Mr Ng and Ms Ong for taking charge of their protection and retirement needs, and giving their children a head start by setting aside funds for their education and protection.
As Mr Ng faces challenges in getting coverage, he should consider endowment plans that come with some protection value, yet do not require medical check-ups.
Mr Ng also needs to set aside more savings to take care of his wife and children, considering his past medical condition.
It is important to prepare funds for different financial needs, for example, the children's education and one's retirement.
I have come across people who end up using their retirement funds to support their children's university education.
Mr Ng needs to take note that he should not compromise his retirement needs by drawing on his retirement funds to pay for his children's further education.
Mr Ng and Ms Ong can consider investing now in dividend-paying funds as a form of passive income. This can form a regular stream of income during their retirement so that they can continue to enjoy a blissful lifestyle.
Manulife has a broad suite of solutions to help clients build their retirement nest egg. One example is Premier Saver 55/65 that provides a lump-sum payout at the client's chosen retirement age of either 55 or 65, with a premium commitment till only the age 50 or 60.
The lump sum can be used to supplement retirement funds. Throughout the duration of the plan, the client will be protected for loss of life, terminal illness, and total and permanent disability.
For more information on retirement solutions, visit www.manulife.com.sg or call 6833-8188.