Insurance for a child born premature

Dear Mr. Tan,

Do I really need whole life policy for my three year old son who was born premature?

Most insurance company hesitate to take his insurance proposal. Company X offered a whole life policy with premium paid for 20 years. I am concerned that in future, he may have problem getting policy on his own, due to his past history. I know that based on insurance needs, he only needs medical coverage now.

Reply:

My understanding is that the highest risk for a premature baby is during the first month and there is a smaller risk during the first year. After one year, the risk should be quite small.

There is no need to insure your son now. When he becomes an adult, he should be able to get life insurance on his own. By that time, I hope that he will buy Term insurance and invest the difference in a low cost fund.

It may be a good idea for you to make additional savings for him. Invest in a low cost equity fund for the next 20 years. It can accumulate to a large amount of savings (compared to the whole life policy).