Why don't you gift insurance to your young one?

TR RamachandranAviva Life InsuranceExpectant parents, like some of you reading this blog, spend months preparing for the arrival of their child. By the time they bring their little one home, they have taken classes, read a library's worth of books, and bought enough clothes to fill an entire dresser. But even with all the preparation, the reality of caring for a baby can be overwhelming.

Basically, when your household grows from two to three, so do your responsibilities. Perhaps the most important element of child care is taking care of the child’s long term security. While you as parents work hard to make sure that your child has all the facilities that you can provide for, there are only handfuls that plan to make sure that the child is never deprived of these facilities, whether or not they are around. The apt way to go about it is by ensuring that your child is holistically protected against all unavoidable circumstances of life is to identify and plan to protect the child through each of his/her life stages. Having said that, the obvious question now is what are these different life stages and how can they be protected? If we try and figure out the different life stages, education and health emerge as the most important one. However, apart from these, there are a lot of activities as well, which are a part of child’s lifestyle and play a critical role in shaping his/her personality and future. These activities can range from sports coaching or painting classes to coaching for higher studies, depending on the age of the child. Holistic protection therefore would mean protecting not just the education aspect of the child’s life but also the lifestyle. There are financial instruments available in the market which can help you address each of these concerns. 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.  Let us look at them one by one:Education – There are a slew of financial instruments available in the market which can help you plan and save for your child’s education e.g. FDs, MFs, insurance etc. The choice of instrument should depend on factors such as your time horizon, risk appetite etc. The major advantage that insurance has over every other mechanism is that it makes sure that your child’s education carries on smoothly even in your absence due to an unfortunate incident such as your demise. The chosen company takes care of the premiums and pays sum assured to the child as a lump sum on maturity.     Lifestyle – Apart from education, a very crucial aspect for the child’s growth is – Lifestyle. This is to say that you should make sure that your child continues to enjoy the same lifestyle as before whether or not you are around. Investing in a simple term plan can effectively address this concern. Ideally, parents should buy a cover which is 10 times their annual income to make sure that in case of any eventuality; the child gets the lump sum and doesn’t need to go through any financial trauma. Afore mentioned investments are critical and will aid in providing that all round care and nurturing for your child’s growth. However, there are a few things that one should always keep in mind. While instruments such as mutual funds or equities might yield better returns in the short term and may help one meet short term investment objectives, long term investment concerns such as education and protection can be best addressed through insurance. Also, parents must invest in a pure term plan as early in life as possible to ensure child’s protection and a comprehensive education insurance plan must follow. This, along with traditional saving and investment tools will provide protection for the child’s education and cover for the parents’ lives, thereby providing an all-round protection for the child’s life.