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Child Plans: Myths vs Reality

Seeing a child makes you smile instantly. A little child surely brightens up everything around.

If you are a parent or will be in the future, you want the best prospects for your child. Caring and nurturing of a child is an overwhelming experience however, it does involve expenses.

Given the current economic conditions, thinking about the expenses part is considerable. Moreover, if you are not with your child tomorrow have you ever thought who will take care of the finances? How are you going to secure the future of your child?

The big question is what would happen if you face premature death.

*All savings are provided by the insurer as per the IRDAI approved insurance plan. Standard T&C Apply

Bringing In the Corpus

Ensuring financial security for the child the best tool is buying child insurance plan. Child policy will bring in the adequate corpus at every milestone for your child so that he is capable enough to fulfil his dreams.

If you are still pondering why would you need a child insurance policy? Look below at some questions and thereafter you are the best judge.

  • How will my child get the best of education?
  • How will my child manage tomorrow when I am not around tomorrow?
  • Do I have enough money in my bank account to manage the expenses of my child?

Well, surely you have your answer.

Buying a Child Policy

The intent of buying a child policy is to provide a safety net to your child in case of any financial emergencies.

Let us have a glance at some advantages to having a child policy as follows:

  • It is a big financial crutch for your child’ future wherein your child is safeguarded with payouts and maturity benefits.
  • Your child’s education is of prime importance. Child policy is ideal for taking care of the expenses in terms of education or any other financial liability such as a marriage, etc.
  • In case of the demise of the parent during the tenure of the policy period the child will receive a lump sum payout as death benefit on maturity and child policy also provides with doing away with the obligation of premium.
  • Sometimes, a child policy also acts as a protector of the income for your child if your child starts earning at a young age.
  • Child policy is also used as surety for higher education loans in the future.

Too Much On the Plate

With a plethora of insurance companies in the market, there is a bunch of investment products being offered. Due to this, it sometimes becomes a tedious task for a parent to decide which child policy to go for. Of course, there are certain misconceptions, which lead to confusion leaving the parent in a state of the dilemma of which child policy to invest.

Let us some myths surrounding child policy so that you can go ahead and make an informed decision.

Debunking Myths around Child Policy

Take a glance at the real pictures behind the myths:

Myth 1- Child Policy covers the child’s life.

Reality- The most common myth around child policy is that buying a child policy insures the life of the child. A majority population is unaware of the truth that it is the life of the income-earning parent is secured. The benefit a child policy brings in is that even if a parent is not around the dreams of the child will be fulfilled.

Myth 2- Upon the death of the insured parent the death benefit of a child policy is paid out as a lump sum and does not take care of the needs of the child in the future.

Reality The Child policy has a component called Family Income advantage wherein payments are made intermittently to the family with the goal that the child’s educational needs are dealt with. Also, if the policy offers the advantage of financing premium wherein the future premiums are borne until development by the safety net provider and the development advantage is paid to the beneficiary. It is to take note of that these advantages are added to the singular amount that is paid out upon the demise of the safeguarded. HDFC Life (HDFC child plan), Bajaj Allianz, ICICI Prudential and Max Life offer the premium waiver benefit.

Myth 3- Child Policy is not pellucid enough.

Reality- In a market-linked child policy, all charges are clearly described. The child policy document gives you the complete and detailed break-up of the charges and you exactly know of where the amount has been invested. Just to keep a regular check you also receive the statement of your holdings.

Myth 4- Investing in a child policy gets your money blocked for an entire term of the policy and you cannot withdraw the money in case of any emergency.

Reality- A child policy is always flexible enough. Moreover, if you opt for a market-linked plan it does give you the benefit of withdrawing the amount partially on the context of emergencies post the completion of certain years. The duration may vary from on insurance providers to the other.

Myth 5- Under a child policy, the payments are made only for the higher studies of the child.

Reality- At the point when the plan's advantages are paid, they should not be just for the child’s advanced education. It is totally up to your attentiveness on how you need to utilize the assets toward the day's end. On the off chance that your child decides not to seek after further studies or you might want to utilize the assets to satisfy some other responsibility, you can do so regardless of the first objective that it was planned for.

The Bottom Line

It is great to build a fund towards the fate of your child. It is imperative to begin as ahead of schedule as would be prudent. The early you start the better return you will get in the long haul.

Additionally, time and consistency are your most noteworthy partners. Having a decent arrangement set up today is superior to an ideal arrangement tomorrow.

With regards to investing for your child, do not choose by hearsay and take an educated choice.

Written By: PolicyBazaar - Updated: 18 September 2020
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