Why is it Important to Purchase Child Insurance Plans

Parents in India are of the notion that investing in a good child insurance plan is a complete waste of money. Parents would rather invest their money in PPF, fixed deposits, mutual funds and other instruments. Although there is surety of returns in investments, the interest rates are not very alluring.

As parents our prime concern is our children’s wellbeing and future. This includes giving them all the financial support they need especially during major events and milestones of their lives. Meeting education expenses, marriage expenses, health expenses,etc., are only some of them. Investing in a good child insurance plan, serves a dual purpose of investment and insurance for your child.

Unlike other insurance plans, child insurance plans do not terminate on death of the parent. Most insurance companies in this case pay the insurance premium till it reaches its term. With a good child insurance plan you not only save enough to meet all your child’s expense, but also ensure that they are well provided for long after your death.

As Yashish Dahiya, CEO, www.policybaazar.com says, “Securing your child’s future with a sound investment plan is a must.“

Parents do not trust investing in child insurance plans and would rather save through mutual funds or term plans. Although, investing as a whole is a good habit, the fact is that child insurance plans score over mutual funds and term plans.

One such factor with child insurance plans is the availability to choose riders. Riders to your child insurance plan could be anything like accidental benefits, disability rider, etc. In such situations the child’s needs are taken care of in case the family member is disabled or no longer lives. Riders like the family income benefit also help the child in case the family member who is a policyholder dies, before the insurance plan reaches term. Child insurance plans are a complete one-stop solution to meet ones financial goal, especially for those investors who do not have first-hand knowledge in investments.

Here are some ways you can secure your child’s future with specific child plan.

• Competing with inflation is a daunting task, especially if there is a continuous annual growth rate. Lifestyle changes and increasing expenses all call for you as parents to be prepared for the future. Education and marriage expenses that are affordable now, could sky-rocket in the next few years. Shielding your family and your child with an insurance plan will ensure that the cost of marriage and education is taken care off. For e.g what you get for Rs.1,000 today may cost you Rs.40,000 a few years later.
• Child plan provide financially for any sort of medical emergency or hospital expense. Taking an insurance plan early on in life will ensure that you receive the required financial support if at all your child faces a medical emergency. As the parent of the child you are allowed to make a lump sum withdrawal from the policy that is still in term to pay for any medical expense. If in case the parent expires before maturity of the plan then the child gets the sum assured that is more than the maturity amount.
• An insurance policy forces you to pay your premium, thus building a good saving habit. Moreover in most child insurance policies, there is a lock in period where the child or the parent cannot withdraw the money. During this period one cannot surrender the policy and instead has to continue with paying the premium. This is in accordance of tax rebate U/s 80C and 10(10(D)).
• When you buy an insurance policy for your child you receive tax benefits as well. Once the policy matures, the returns received is again tax deductible. Hence investing in child insurance plans proves to be a good tax saving investments.
• If you have a daughter there are insurance plans initiated by the Government especially designed for her. The Sukanya Samridhi Account is one such plan that is being promoted for the welfare of the girl child. This is a money-back guarantee plan, where the investments are minimal. Incase you default in the payments you can revive the policy by paying a penalty amount which is minimal. Death benefit riders however are not associated with this government initiative.
• If you stick with the plan and continue paying your premiums on time, there are loyalty benefits or loyalty additions that you can receive. By offering benefits the insurance company encourages you to make your premium payment on time. By giving you loyalty benefits you are partaking of a percentage of the company’s profits. These benefits are paid on either death of the insured or on maturity of the policy.

Parenting is an uphill task, it is always about making the right decision for your children. By investing in your child’s future you ensure that your child gets the best even if you are not around.