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Find out: The need to have your child's life insured

Manju Dhake
Sushil Insurance Brokers


To secure children's future is the most important financial goal of any parent in their overall financial planning. An appropriate child life insurance plan can help you save money for your child’s future goals like education, marriage etc.


Child insurance plans cover the life of the earning parent while certain policies cover the life of the child and pays the sum assured in case of any eventuality of the life insured. The maturity benefits are paid off depending on the type of plan bought. 


Also read: How IRDA's recent health insurance reforms will benefit you


There are different types of insurance plans for children: 


Money Back Child Plans: This plan provides survival benefits at regular intervals.


ULIPs or Unit Linked Insurance Plans: These plans give flexibility of partial withdrawal.


Endowment Child Plans: Endowment plans provide the lump-sum amount at the time of maturity of the plan or when the child turns 18 years. These plans have 2-3 options to choose from, where some percentage of sum insured is paid which is defined at the inception of the policy and the option opted for.


Unlike olden days, when child insurance was only about investing certain amount of money in order to protect your children from uncertainties, insurance policies, now play a more crucial role in planning systematic financial goal for them.


Also, earlier the trend was to take a policy in a child's name, which was a simple money-back plan. Now, parents take a term cover in their name, which would be replaced if there is any loss of income due to the untimely demise of any of the earning parents. This way, it serves the twin benefits of investment and protection.


However, many parents still wonder if they should buy life insurance for their children.


Here are few reasons why you should consider buying child life insurance plans: 


1. Helps you Save: A child insurance plan helps you save for your children’s future so that you can fulfill their dreams and aspirations. 


2. Your Children will Always Remain Insured: Buying life insurance policy for your children will always keep them covered regardless of their future health (considering the various factors that can affect your child’s health). They will never be denied of insurance no matter what medical problems he/she faces.


3. The Policy Can Build a Cash Value: Whole life insurance policies for children can earn cash value. By the time they turn 18, that cash value increases many fold. Your child can use the money to buy a car or borrow off the policy to help pay for college. 


4. Small Policies are Affordable: Life insurance plans for children are available in very reasonable prices and most of them are easily affordable. With low policy amounts, the costs are relatively inexpensive.  


5. The Rate is Locked In: Buying life insurance for children now will lock in that rate for the life of the policy. The premium will never change no matter how long your child has the policy. Though, this particular benefit vary from company to company. 


6. Enjoy tax benefits: Investment in children plans can enable you to enjoy tax benefits under Sections 80C and 10 (10D) of the Income Tax Act, 1961.


While the above mentioned benefits would certainly tempt every parent to buy insurance policies for their children, they should always investigate the products to verify what they want out of the policy. It does not serve any purpose if the money you have invested fails to help you meet your financial goal.


If you find it difficult to judge the pros and cons of any plan, it is always better to consult a financial planner/insurance broker to understand the need for such products and more importantly, understand the goal and the costs associated with such goals.


The author is a principal officer at Sushil Insurance Brokers.

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