Choosing the correct insurance plan
Imagine this scenario: An 18 year-old girl whose father passed away three years ago must now make achoice, between whether to go to medical school, or keep living in her ancestral home. In case of unforeseen circumstances, such decisions become a regular obstacle that a child has to overcome in every step of his life. From higher education to opening a business, marriage and purchasing a residence—all milestones of our children’s lives depend primarily on the kind of resources we leave behind.
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Choosing the correct insurance plan at present makes the future smoother for both you and your child. It reduces the financial burden faced by parents when confronted with a sudden large expenditure. As these expenses are largely predictable, it is prudent to starting preparing early on. Additionally, in case of sudden demise of the guardian the policy remains in place and ensures timely returns for the child.
Insurance for children can be of many kinds, and for many different purposes—such as life insurance, health insurance and education insurance. Your choice will depend upon your child’s need and the resources you have at hand. While considering the options, here are some things that you should remember:
- When to start: Choose a child’s plan, which encourages long term investment.Insurance for your child must take into account the large scale needs that will be faced by him at specific ages, like 18 and 23. Investing in a Child plans are mainly composed of premeditated benefits at maturity along a fixed timeline. Early planning and timely investing in a child’s future will make this a straightforwardprocess.
- Inflation and rising prices: When investing in a child plan, you must remember that the funds will be utilized only in the future. The point of time at which the money will be needed, the amount at maturity and the inflation costs should all be taken into account while calculating the premium. The object is to build a substantial corpus that can adequately meet the rising cost of education.
- Choosing an appointee: As the beneficiary for such plans is almost always a minor, it is vital that you select a trustworthy appointee. The appointee must be an adult, and will be paid the sum assured if the beneficiary is a minor at the time of policy-holder’s demise. The appointee must be formally instructed by the policyholder through a will or other means. If the beneficiary is an adult at the time of maturity, he is paid the sum directly.
- Flexible investment plan: Choose a plan having facilities like System Transfer Plan and Dynamic Asset Allocation to assure that your gains in the child plan investment are well protected against market fluctuations. Also, ensure adequate risk coverage so that death benefit is a considerable lump sum, which can aid your child and family in case of your demise.
- Premium waiver benefit: Always invest in plans offering premium wavier benefit. This stipulation enables the child to be covered with all the benefits even if the parent dies, becomes disabled or cannot pay the insurance premiums due to critical circumstances. Should such a situation arise, the insurance providers continue paying the premium on the policy holder’s behalf. Thus, this option ensures that the maturity benefit agreed upon for the policy term will remain intact.
- Partial withdrawal benefit: Some parents choose to withdraw a part of the maturity amount earlier, instead of opting for a single payment of the total amount. Medical and other emergencies faced by your child can force you to seek financial help. Provision of partial withdrawals will givesa policy holder the flexibility of meeting these unplanned expenses without disturbing his regular income-and-expense equilibrium.