Child Insurance Plans: Best Purchased When Kids Are Still Young

Raising a child not only involves emotional affection but also involves money. Whether you are grooming an infant or a school-going kid, you must meet the expenses at different stages of your child's life. Every parent wants their children to have a perfect life. However, the 'perfect life' demands a secure plan. There are many challenges that you will have to face to become a successful parent.

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That is when the idea of a secure plan arrives so that you can provide a perfect life to your child. And the only possible way for this is to prepare well-informed financial planning.

For your child's bright career, secure financial planning can do great wonders. Higher education is expensive and given the current costs, the requirement of a secure financial plan is recommended to every parent. 

With a very basic understanding, you can say that a child plan is a blend of insurance and an investment that can help your child with funds to meet future needs at different phases of life.

In today's time, you can buy several types of child insurance plans to safeguard your child's future against any life's uncertainty. However, not many people are motivated in India to buy a child insurance plan. The reason could be that it is still a new concept for so many individuals. But time and again as many people came to know about the child insurance plan they have bought it right after finalizing their requirements. 

Buying a child insurance plan comes with several benefits. Also, it is one of the few plans which provides maturity benefit. 

The best part is, you can compare child insurance plan not only with other insurance plans but also with other investment tools like fixed deposits and mutual funds. You will see, with a child insurance plan you are getting higher returns as compared to other investment tools.

Child insurance plans are the best way to receive higher interest rates on the investment. At the time of maturity, you will get an option of flexible pay, re-investment in equity, or repayment of the debt, etc. If you have the basic know-how of the policy, you can have a sound financial future for yourself and your entire family. 

Basic features of Child Insurance Plan

Child plans offer you the dual role of financial security in terms of both investment tools and insurance products. Let's understand this in a bit detail:

  • Aids in terms of an Insurance product: In the event of the unfortunate death of the insured parent, the insurance company pays the premiums to keep the planned corpus in check which in turn keeps the sum assured in check and secures the child's financial future.
  • Aids in terms of Investment Plan: Child Insurance plan works like an investment as well, in case of no unfortunate death of the insured parent, at the time of maturity, the sum assured can be used to meet several needs such as higher education, new venture, marriage, etc.

The Right Time to Buy a Child Insurance Plan is when They are Young

If you are not thinking of buying a child insurance plan at present time. You must be ignoring one simple factor and that is 'inflation'. The average inflation rate will make the education cost along with other necessary expenses will make harder for you to bear after 8-10 years. 

The Industry experts suggest that it is better to buy a child insurance plan when your child is at least 5 years old. That way, you will be able to meet future expenses with ease. Depending upon the tenure of your policy you can make enough investment to support your child in financing the start-up, higher education, marriage, etc. 

Many child insurance plans offer smart maturity benefits by the time your child is 18 years old. This means the early you can start, the sufficient sum assured you will receive at the time of maturity. 

Important factors to keep in mind

  • You must begin by preparing definitive goals, for instance, how much cover will be required for desired education. This will help you decide how much money you require to save each month to pay off the premium along with your other regular bills. Although, there is always an option to fund the studies via education loans. However, as your financial goal gets closer (Like a home loan, retirement plans, etc), it is advisable to lessen your equity exposure to minimize the risk of adverse market changes.
  • Before purchasing a child insurance plan always consider the inflation effect. Inflation leads to a significant increase in education expenses each year. Usually, education expenses rise faster than the inflation rate. Therefore, you should start saving for your children's education early along with the consideration of the time factor. The extra step is added when your child is planning to study abroad, you must consider the changes in exchange rates as well. If you will follow a wise investment strategy, you will be able to meet future expenses at ease.

Final Words

With the arrival of private companies, the life insurance industry in India has seen remarkable growth over the years. Every company offers different benefits along with the child insurance plans however, you will enjoy the basic structure with added riders with almost any insurance company. It is advisable for you to do proper research on child insurance plans before investing your money in the same. You can compare plans online using the Policy Bazaar portal. Comparison around the right information will help you make an informed decision.

Written By: PolicyBazaar - Updated: 20 August 2021

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