Insurance planning for the family

Dear Mr. Tan,

I have been visiting your blog and your website to get some ideas on insurance tips.

I am from a middle income family. Both my husband and I work. Our combined income is about $7,000 per month. I have two young children.

I plan to buy term policy for my husband and myself, and perhaps some investment linked plans for my children. Is the investment linked plans suitable to save for their education funds?

Why do people opt for decreasing term if the sum assured reduces every year? It does not sound reasonable to opt for decreasing term just because the premium is slightly lower?

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REPLY

I prefer the investment linked plan to save for the child's education fund. You can read this FAQ.

I recommend the decreasing term assurance as the premium cost half of the normal term. As your savings build up each year, your need for insurance cover reduces correspondingly.

However, if you wish to keep to a level term, so that the total amount of the term and savings increases over the years, it is also a good idea. It is all right to pay twice the premium for a level term, as the premium is quite low anyway.