In this day and age, it is the duty of every parent to secure the financial future of his/her child. While a term insurance plan takes care of the needs of a whole family, child insurance plans are designed with the sole purpose of securing the financial future of the insureds children. These plans ensure that the children are financially protected against the various expenses including education following the unfortunate demise of the parent or guardian.
Why child insurance plan?
It is true that term insurance takes care of the future financial requirements of an entire family. However, this should not be cited as a reason to avoid child insurance. Child insurance has very specific benefits when it comes to securing the future of your children. One of the major benefits of child insurance is that the plan will continue even after paying the lump sum following the death of the insured (parent or guardian). Most importantly, the future premiums are waived following the death of the policyholder.
Till the child comes of age, the plan will stay active and the company will invest on behalf of the policyholder (even after paying the lump sum death benefit). The money earned through this investment is paid periodically to meet the expenses incurred by the child. A regular ULIP or term insurance will come to an end following the death of the policyholder. However, a child insurance plan will stay active till the child reaches 18 years of age. Child insurance plans are ideal to take care of the needs of your children even if you are not around.
Cost of child insurance plans
Though the benefits of a child insurance plan cannot be disputed, the cost of this insurance plan must also be considered. The cost of a child plan is much higher than that of a term insurance. For instance, the premium per year for a child insurance plan will cost somewhere over Rs.1 lakh (for sum assured around Rs.50 lakh). Since this has maturity benefits, the payout can be received even if the parent survives the policy term.
On the other hand, a term insurance plan for Rs.50 lakh can be bought for as little as Rs.1,300 per month. However, a term insurance does not provide any maturity benefits if the insured survives the policy term. Another cost to be considered here is the mortality charges (waiver of premium following death). These charges are much higher in a child insurance plan compared to a term plan or ULIP.
A child insurance plan comes with its own set of benefits compared to a term insurance plan or ULIP. This plan is designed in such a way to take care of the needs of a child. Since there is a steady lump sum payout at the end of the maturity term, an average Indian investor is not likely to stop this investment due to market volatility. Most importantly, a child insurance plan offers customised payouts to help a child in every stage of growth.