Is Having a Child Insurance Plan Really Worth the Cost?

Parenting these days has become quite challenging than it was a decade ago. Immense pressure is for parents to bring the best for their child. Nowadays, a major challenge is to arrange the finances for your child, so he/she does not have to give up on the dreams.To tackle this scenario, it is required to ensure a right financial planning for your child at the right age that would ensure that your child’s future needs are fulfilled. There is no better gift than promising a secured future for your child.

What is a Child Plan?

By investing in a child insurance plan, you can gift your child a secured future and he/she can easily fulfill the dreams. Typically, a child plan has insurance plus investment element. With investment part, it ensures the growth of your money that will help your child fulfill his/her dreams and with the insurance cover, it provides a lump sum amount on the death of the policyholder (parent). With the waiver of premium benefit, a child plan continues till end of the policy term, even after death and the maturity benefit is also payable. Under a child plan, the benefits are payable to suit your child’s key milestones so he/she can achieve the education and career goals.

Reasons to Invest in a Child Plan

Here are the key reasons, why you should invest in a child insurance plan.

Takes Care of rising cost of Education:

  • Securing the child’s future is one of the primary concerns of every parent. Providing your child a quality education is not at all easy, considering day to day rising education cost. Inflation is growing at a rate of over 10% every year in the education sector. According to a study by the Assocham Social Development Foundation, more than 70% of parents spend 30 to 40% of their salary on the children’s education.
  •  It thus becomes extremely important that you plan well for your children’s education. By investing systematically, a child plan will help accumulate a corpus that can be used to meet your child’s education expenses and you will get relief out of a financial burden. Under these plans, the payouts are provided at specific intervals to suit his/her educational needs.

Act as a back up plan in case of Death of Parents

It is always tough for you to leave your family and they have to face a problematic financial situation. Considering the uncertainty of life, it is imperative to buy a child plan that can secure your child’s future. By investing in a child plan, a lump sum amount is payable on your death and the policy continues till its maturity, which ensures that child’s needs are properly taken care of, even in your absence.

Serve as a Collateral for Loans

A child insurance plan is also accepted by banks as a collateral, in case you are looking to take an education loan for your child. It will help your son or daughter to go on for higher studies or going abroad for education.

Ensures periodic saving habit

Prior buying a child plan, it is advisable to calculate the need for funds during the various stages such as primary and secondary education, higher studies, marriage, etc. and then invest accordingly. By investing premium regularly in a child plan will put in a habit of saving that further helps to you can grow money over a period of time.

Types of Child Plans

  • Endowment Based Plans: Under these plans, the company provides a participation in profits that helps to grow your fund value. It is an insurance plus investment plan, in which the returns may vary depend on the bonuses given out to you.
  • Unit Linked Plans: Under these plans, your premium is invested in the funds as opted by you. As it is an equity investment, you also need to bear the risk associated with it. The insurance company will also deduct various charges such as Premium Allocation Charge, Administration Charge, Fund Management Charges, etc. All these charges are deducted from your premium amount and a small portion gets invested, so the returns from these plans are low during the initial years.

Investment in a Child insurance plan is really helpful and you only need to do a proper financial planning prior to investing. A right child plan helps to accumulate a sufficient corpus that can ensure a financial security to your child’s future. It is also recommended to buy a child plan online that offers maximum coverage in an economical way. Most importantly, buy insurance basis the education and career goals of your child.

You can also buy a health insurance for kids that can take care of healthcare needs of your kids.

Harjot Singh Narula

Harjot Narula is founder and CEO of ComparePolicy.com, an IRDAI approved insurance web aggregator focussed on selling online insurance for companies. Harjot has more than a decade of experience in software development and has also spent 5 years in US working for the mortgage and risk management industry.

Leave a Reply

Your email address will not be published. Required fields are marked *