Common Myths about Child Insurance Plans
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Updated date : 28 August 2019
Myths for Child Insurance Plans
There are many myths surrounding child insurance plans in the market. Many people have a lot of misconceptions about the different features of such policies and thus, they hesitate to opt for them. This can put a lot of burden on your financial condition in the future, as the cost of higher education is increasing significantly in contemporary times.
One should also consider the requirements of the child in case something unfortunate happens to the parents, while choosing such policies. You have to understand that having a proper child insurance plan can ensure that the education and other requirements of your children will be taken care of under any eventuality. In this regard, let us get a detailed understanding about the different myths around child insurance plans.
Myth #1: The plan only offers insurance cover for the child.
This is not completely true and in most cases, the policy provides life cover for the parent. This is so that you don’t need to worry about the financial security of your children even in your absence.
When you choose the tenure of the policy according to the age of your child, you can plan it in such a way, that you get a lump sum amount when the child reaches 18 years of age. Many policies offer regular lump sum amounts on an annual basis after the child reaches the age of 18 years. This can continue till the maturity of the policy. In this manner, the educational needs of your children can be taken care of.
In the unfortunate event of the death of the policyholder, the policy continues to be active and all the benefits will be passed on to the children at an appropriate time. This can be a huge relief for any parents to know that the education of children will not be affected due to adverse incidents in their life.
Myth #2: The plan is suited only when the child gets enrolled for higher studies.
This is absolutely wrong and you can easily claim benefits when the child attains 18 years of age. There is no need for your child to enroll for higher studies in order to get the payout from the policy.
Many people plan the policy tenure in such a way that the benefits can be accessed at the time when the child enrolls for higher education. This is because, the cost of education is not much for primary education but rises steeply when applying to colleges. Thus, getting a lump sum from the policy at the right stage becomes very important and many child insurance plans can be customized to serve this purpose.
You can easily invest your savings regularly and get good benefits in return. Many people use the benefits of the policy for the marriage and other requirements of their children.
Myth #3: You need to wait till the end of the tenure to get money.
This is not true and you can get loans from the policy within a few years of commencement. Similarly, when you choose unit linked child insurance plans, you can make partial withdrawals whenever you are in need of money in the future.
The thing you need to understand about child insurance plan is that some have a lock-in period. During this time, which is usually 5 years from the beginning of the policy, you will not be able to withdraw any money from the plan. However, after completing five years, you can surrender the policy to take a loan. This can be very useful to meet your emergency financial requirements and you can even continue to get the benefits of the policy in this manner. Remember that the terms may change slightly from one policy to another, and you must check the exact provisions with your insurance service provider.
Even with a partial withdrawal of money from the policy, you can continue to get benefits for the remaining amount of money invested in the plan. This is a major advantage and you can cash out your savings at the right time when the market conditions are favorable.
Myth #4: The policy gets terminated after the death of the parent.
This is the most common misconception. The future of your child will be protected even after your death, when you choose this policy. You will also be glad to know that the policy offers a provision to receive complete benefits without paying future premiums, in case of death of the insured parent.
Many people are worried about how their family members will pay the premiums after the death of the policy holder. There is no need to worry about this aspect when you choose plans that come with a premium waiver benefit. With this benefit, the future premiums after the death of the parent will be paid by the company and the policy will continue to be in force. This guarantees that the future requirements of the child are efficiently managed even during the absence of the parent.
To meet the emergency requirements of the family during the death of the parent, the plan even provides a lump sum at the time. All these features can help the family members handle the crisis.
Myth #5: It may not be able to meet the demands of higher cost of education in future due to inflation.
The insurance companies calculate the sum assured and other aspects of the policy after taking inflation and other factors into consideration. You can rest assured that you will be able to meet the financial needs of your children in the future by choosing a package according to your present financial condition.
One thing you need to remember about child insurance plans is that most of them do not have a maximum limit on the amount of premium you can pay for the policy. This is a good option for many people as they can save a sizeable portion of their income regularly to provide financial security for their children.
If you are a salaried person, you can choose to pay the premiums on a monthly or quarterly basis. On the other hand, if you are a business owner with irregular income, you can choose the single premium payment plans and invest a lump sum amount. It is also possible to get different income tax benefits by investing in such plans.
Myth #6: The death benefit is provided only in lump sum and there will be no protection in future.
When the parent dies during the tenure of the policy, the beneficiary gets a lump sum amount from the insurance company. Along with that, the policy continues to be active and the child receives all the benefits after the maturity of the policy.
There is no need to pay future premiums either when there is a premium waiver benefit with the plan. This is a good way to ensure that the family will not have to bear the financial burden after the death of the policyholder
Myth #7: There is no clarity with the terms and conditions of child policies.
There is no truth in this claim and all the terms and conditions are clearly mentioned in the policy document. If you have any doubts in this regard, you can easily approach your insurance agent and get all the doubts clarified.
Even after understanding all the terms, you may still be not satisfied with the features or other aspects of the policy in some cases. If you have any objections to the terms or conditions mentioned in the policy after you have purchased it from the service provider, you will still have the option to return the policy and get it terminated.
In most cases, companies allow consumers to return the policy within a few weeks from the date of commencement of the policy.
|Read more: Sukanya Samriddhi Yojana|
To Sum Up
These are some of the most common myths surrounding child insurance plans and you should do some thorough research before you buy them. Remember that different service providers may offer different features and you have to compare multiple plans before deciding the option most suitable for your situation. You can even approach reputed insurance experts and get their opinion deciding the best child insurance plan for you.
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