GIVEN a choice, most youngsters probably would not go to school. preferring to spend their time playing truant, among other things. So, American International Assurance's decision to call its updated juvenile-insurance product Kid's Choice is a little suspect.
The choice will, in fact, be mum's and dad's because they are the ones who have to pay the school fees, whether or not Joey or Janey wants them to. As it turns out, though, life insurance for children can be a practical way to plan for those fees.
'People are becoming increasingly conscious of the need to provide security for their children,' Derek Yung Kai-ming, AIA's assistant vice-president for marketing, said. 'This is possibly the best gift a parent can give a child because it cares for both present and future.' A juvenile life-insurance policy is a long-term savings vehicle that provides a lump-sum payment on an agreed date, usually the child's 18th or 21st birthday. Most also give the child, when mature, the option of converting the policy into life cover and raising the sum assured, usually without the need for further medical checks.
AIA's product does similar things, and more. Kid's Choice policies, which can be taken out on children aged 14 years or younger, combine life insurance with a savings package and educational loans for university.
Premiums are due for 21 years. The premium on a policy taken out on a new-born and carrying a sum assured of US$10,000 would amount to $361.20 a year. For the first 18 years of the policy's term, a cash return equivalent to 3 per cent of the basic sum assured would be paid every third year.
After 21 years, when the policy is fully paid up, the insured receives 30 per cent of the basic sum assured in cash, and the value of the sum assured doubles. The insured can remain covered by the policy until age 100 or roll it into an adult policy, but there is no inflation-protection option that would boost the sum assured gradually in line with consumer prices. A guaranteed-insurability option would allow the insured to buy up to three times more life insurance 30 days before or after the policy is fully paid.
In updating its juvenile policy, AIA has added an optional critical-illness rider that covers against the death or disability of the payer, usually one of the child's parents. Should the payer die, contract a critical illness or become disabled and unable to continue payments, AIA would cover the rest of the premiums. The child also would receive a payout equal to half the sum assured, up to $500,000, if the payer dies in an accident.
