Child Insurance Plan

help create a corpus for crucial stages in the child’s life

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Know Your Policy - Child Insurance

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Children are the future of any country. Parents wish the best for their children but do they provide enough for them financially to deal with unexpected turn of events in life? Do they secure their children’s future? The answer is “NO” in a majority of cases. This is because many may not have sufficient knowledge of child insurance, or may assume that there are better ways of securing their children’s future, as in the case of investing in public provident fund, equities and so on.

Ther is no escaping the fact that it is every parent’s responsibility to ensure that they have provided for sufficient finances in order to secure their children’s future. With rising inflation, education costs and increasing material needs, insuring a child’s future is no longer just an option, but a necessity of life.

In the past, it was a common practice to buy an insurance Policy in the name of children. This simply served as a form of investment. But with increasing sophistication in policies, parents could buy a child plan where the insurance company pays the remaining Premium on behalf of the parent in case of their untimely death. This ensures that the child gets sufficient money even in the absence of their parent to pay for the remaining part of the insurance premium. In effect, not only is this plan a form of investment, but is an added advantage in that it covers risks of life like never before!

Child plans usually have a higher insurance premium payment than Term plans. Is this a disadvantage? Certainly not! In case of death of the parent, the insurance company not only pays the sum Assured but also continues to pay the premium on behalf of the policy holder till it matures. The payouts from insurance company can be pre-decided so that it matches with the child’s education needs. After all, is the very purpose of insurance not to protect against the unforeseen and the unknown?

In some child insurance policies that are Unit Linked (ULIPS), one can even withdraw up to 20% of the assured amount of money after the first five years of buying the policy. Another attractive option is taking advantage of a health benefit rider, which is applicable when the policy holder (parent) contracts any of the listed illness in the policy. Income benefit rider helps in provision of a fixed income at a fixed interval to the child in case of death of the parent.

Although term plans and mutual funds are also good investment choices, child insurance has an added advantage of premium waiver. Another practical reality is that most parents start investing for their child very late. In such cases, term plans, mutual funds and other options may be beneficial. If an investment has to be made at an earlier stage of the child’s life, a child insurance policy is more practical and safer, given the fact that it has an investment, safety, and income benefit linked to it.