If you have had the privilege of being a parent, you know that there is nothing that can replace the feeling of being a father or a mother. Every time you look at your child, you can imagine the feeling you had when you held your newborn baby for the first time. While it is not easy to articulate, the feeling can be best described as doing anything necessary to make their life better.
One of the best ways you can do that is through a child insurance plan. It is a great tool to minimize the financial burden of affording a great future for your child. For this reason, it is growing in popularity among parents. It is a great way for them to help their kids realize their potential and ensure that they are financially secure.
But how much do you know about child insurance plans? Because buying something you don’t know about is not the best way to set an example for your kids. Hence, here is a look into what a child insurance plan is and 5 things to look for when you buy it:
What is a child insurance plan?
A child insurance plan is a type of life insurance that provides financial security to your child. But, in addition, it also includes components of investment to generate enough founds for any future plans that your child may have. This helps you in not just planning for the future but also executing your plans and help your child achieve their goals. These goals can include higher education, marriage, etc.
While the investment section of the policy helps you build a corpus, an insurance coverage offered by the plan can help you protect your child’s future against the possibility of your premature death. At an early stage of life, it is important for your child to have financial support from their parent. A child insurance plan can make sure that support is given even in your absence. In the case that you pass away before you collect the targeted amount of money, the plan can give your child the amount you originally intended to.
Things to look for while buying a child insurance plan
- Educational cost and inflation rate
Before you commit to a sum assured, take into account the estimated cost of your kids’ education. Then, think about what the cost would be when your child will take the particular course using the inflation rate. If a degree costs 15 lakhs right now, add the projected inflation over the years and then you’ll have a close figure of how much you’ll have to spend on your child’s education. Make sure that you go for a sum assured that is at least 10 times your current income.
- Plan tenure
You need to consider the age of your child and the duration of the plan. For instance, if your child is 8 years old, add an additional ten years that they would take to pick a field of education or a career. Hence, 10 years is the minimum plan tenure that you should go for.
In case you end up choosing a short-term plan, you may be faced with a cash crunch, as you will require funds before the maturity of the policy. Therefore, it remains crucial to decide the term of the policy with respect to your child’s present age.
- Partial withdrawals
Not everything always goes according to plan. Sometimes you end up needing money for your child’s financial requirements before you projected. In such a situation, you need funds to fulfill those needs. If you end up needing funds before the plan’s maturity date, make sure the plan has a partial withdrawal option.
A life insurance rider helps people strengthen their existing cover. It is usually added at an extra charge. Look at the riders that your insurance company offers and then select the ones that you think your child might need. If you don’t find the right riders, explore other insurance providers.
- Plan comparisons
You can easily compare different child insurance plans online. It is quick and easy to do, and it helps minimize the time spent on finding the best plan. However, you should make sure that your comparison is thorough and that the option you select is the best for your child.
Child insurance plans are ingenious. But they are also very tricky to buy. The reason for that is that you are not buying insurance for yourself. You are buying it for your child so that they could select their own path in the future. Hence, you need to understand the needs and preferences of your child before you buy the policy.