Every parent wants to do the best to secure the future of their children for a better tomorrow. Loving your child is what comes naturally, but to be a responsible parent, you must fulfill certain obligations towards your child. Successful parenting has its own set of challenges. Thus it is imperative to start planning for your child’s future right from the beginning and start allocating funds through a disciplined savings habit to create a financial corpus.
Moreover, getting a child insurance plan is one of the most important obligations that the parents should consider, while planning to secure the financial future of their children. Initially, it might seem confusing to invest in a child insurance plan because a child does not have dependents, liabilities, and insurable interest. Most of the customers have this misconception that the life of the child is to be insured whereas, in the child insurance policy the parent is the life assured and the child is the nominee.
If you are a concerned parent who wants to ensure that your child has the right financial protection for the future, read further to know why you must consider investing in a child insurance plan.
In this day and age, having a financial backup for the fruitful and bright future of your child is important and cannot be overlooked. A child insurance policy helps you to create a financial corpus for the child and save ample for the future. The child insurance plan not only provides financial protection to the child but also takes care of the educational expenses without any stress or financial burden. The lump-sum amount offered by the child plan depends on the term and condition of the plan and the amount one has invested in form of premiums.
An uncertainty can happen with anyone anytime and no amount of preparation can leave one ready for any such event. The unfortunate demise of parents can have an adverse effect on the child both emotionally and financially. With the child insurance plan, the parents can ensure the financial safety of the child. In case of demise of the parent during the policy tenure, the insurance company offers a premium waiver benefit under which the entire premium of the policy is waived off for the rest of the policy tenure, and the benefits of the plan continue to be in force. In most of the best child insurance plan, the premium waiver benefit comes inbuilt. However, if It does not comes inbuilt then the policyholder should opt for this rider. The rider ensures the policy to continue without any break and passes the burden of premium payment to the insurer in case of uncertain demise of the life assured during the policy tenure.
The child insurance plan also offers the option to withdraw funds in between the policy tenure. The withdrawal fund can be used for the medical treatment of the child in case he/she falls sick. Partial withdrawals come in handy when the child is hospitalized due to a minor accident, ailment, or a serious medical condition. Moreover, the child plan also helps to lower the financial burden that may arise due to medical expenses, and the payouts act as an add-on for one’s health insurance plan.
With the skyrocketing education cost in India, higher education is very expensive whether you want to send your children to university, private college in India or abroad. International studies are significantly more expensive. Thus to ensure that the higher education cost of the child is covered, it is a must for you to have a child education plan. With a child plan, you can secure a loan for higher education, and the benefits offered by a child plan can be used as collateral for the loan. As a lucrative option of investment for a child’s financial planning, the child plan not only takes care of the higher education but also helps to initiate the habit of disciplined savings to secure the future of the child.
Let’s see with the help of an example, how child plans are beneficial.
If an individual purchases a child insurance plan of 15 years at the age of 32, the maturity amount can be a bit low as compared to the other options, however, it will cover the untimely demise of the life assured.
|Child Plan||Term Plan + mutual fund combo||Ordinary ULIP|
|Insurance Cover||Rs.45 lakh||Rs.45 lakh||Rs.45 lakh|
|Premium Per Year||Rs.1.2 lakh||Rs.6,000||Rs 1.2 Lakh|
|Mortality Charges Over Full Tenure||Rs.2.45 lakh||Rs.90,000||Rs.1.52 lakh|
|Death Benefit||Rs.45 lakh is paid to the insured’s family on the death of the insured. The premium of the policy is waived off and on maturity, the child receives the fund value.||The beneficiary receives the sum assured of Rs.45 lakh or the fund value whichever is higher||The beneficiary receives the sum assured of Rs.45 lakh or the fund value whichever is higher|
|In case of demise of insured person after 5 years||Rs.63.4 lakh||Rs.52 lakh||Rs.45 lakh|
|In case of demise of insured person after 10 years||Rs.66.9 lakh||Rs.64 lakh||Rs.45 lakh|
|Maturity Benefit||Rs.31.1 lakh||Rs.37.8 lakh||Rs. 33.25 lakh|
*the computation assumes a 10% return for all 3 investments; the death benefit of the child plan includes a payment of lump-sum Rs.45 lakh and the future premium of the policy is waived off for the rest of the policy tenure.
Some of the child insurance policy provides regular income to the child, in case the parent is not around to pay the premium. The regular income is in form of 1% of the sum assured amount.
If your child has any special talent like acting, playing instruments, art, etc. then you can encourage your child to pursue it further and make a career in it by making a partial withdrawal from the child insurance policy. Moreover, some of the policies also offer the option of periodic pay-outs that can be used to meet the expenses that might arise while pursuing the child’s talent further.
Some of the child insurance plans come with an inbuilt rider option of waiver of premium. Under this option, the entire premium of the policy is paid by the insurer in case of an unfortunate demise of the life assured during the policy tenure. Similarly, some of the child insurance plans also offer the option of personal accident rider.
Creating a strong financial cushion for your child’s future is extremely important and the child insurance plan helps you to right financial backup for the child’s future financial requirement, hedging all the uncertainties. It really doesn’t matter how much you start saving with; your objective should be to start saving as early as possible so that you can ensure a profitable return in the long-term.