Why Parents Must Buy a Child Insurance Plan?

Parenting brings a sense of responsibility and immense joy to everyone’s life. But, it can seem scary sometimes. Hence, buying the best child insurance India online is a great way to avoid such fears which is so predictable.

This plan gives policyholders financial strength to deal with situations for which parents are not ready. The needs of a child can be differentiated into three categories such as educational, medical and last but not the least, marriage. When parents prioritize the requirements, then they can easily allocate the necessary funds to fulfill these needs.

The fund can be created either by saving in bank deposits or by investing in mutual funds in parent’s name and declare the child as nominee. There are two important factors that you must keep in mind while investing in child plans.

·         The exact time when parents need the returns

·         Inflation – parents need the money at a later date and hence, this factor is important especially at the time policyholder requires amount.

Once you consider both these factors, you can analyze the policy which best suits your requirements and budget as well. Analyzing different plans and knowing how they work before investing in the child insurance India.

These policies are designed to help parents to create a strong financial corpus that comes in handy for policyholders’ requirements. Features vary from plan to plan. So, analyze the product in detail and select the one. Sometimes, insurance companies in India pay the remaining premium in case of parent’s death.

It makes sure that the maturity amount will definitely receive by the child as mentioned in a plan. Some child insurance policies allow for partial withdrawals and help in crises situations without disturbing the other income and planned expenses. Do not forget to check child plan insurance age limit because it helps to save on premiums.     

Child insurance is available in two types such as unit linked and traditional plans. Both types are different in their features but help in generating much needed financial protection. Unit linked child insurance comes with inherent risks whereas traditional plans are for risk-averse.

Generally, these insurance products are tailored to offer timely installments for education, marriage and other specific needs. Customers are advised to check the details wisely and invest in the best that suits their requirements.

[Source: https://childplan.wordpress.com/2015/07/21/why-parents-must-buy-a-child-insurance-plan/]

Is There a Best Insurance Policy For Your Child?

The Wealth Architects

I am often asked — 'Which is the best insurance policy for my child?'

And the answer — None.

The primary objective of an insurance policy is to mitigate the "financial" hardship that the family may suffer in case of any unfortunate eventuality happening to the insured. In most instances, a child is not the breadwinner in the family. Hence, "insuring the child" is meaningless and a wasteful expense. Therefore, never buy an insurance plan where the child is the insured person.

Then, there are the "child" oriented policies.

Also read: Here are some special health insurance plans for diabetics

Typically, in such policies:

a) The parent insures himself and/or herself

b) The child is the beneficiary

c) The maturity of the policy is designed such that the payout happens for say the child's higher education or marriage

d) If, in the interim, something unfortunate happens to the parent, (i) the Sum Assured is paid to the child and (ii) the policy continues without any break (the insurance company pays all the future premiums).

The child-oriented policy, therefore, is quite useful in protecting the child’s future. However, it comes at a very high-cost; which translates into poor returns.

And it is n’t flexible at all. Once bought, you are stuck with it for 10 to 20 years. You don’t have much leeway to modify your investments, if circumstances change during this long period of time (which is fairly common in today ’s dynamic world).

Therefore, a Do-It-Yourself strategy makes for a better approach.

Under this

1. The parent(s) should insure themselves with a “term plan†and high Sum Assured. The premium for such plans will be SIGNIFICANTLY lower (almost 10-20 times less) than the aforesaid child plan

2. The child, of course, is the beneficiary of the policy

3. The balance amount [equal to the premium that you would have otherwise paid for the child plan minus the premium for the term plan] can be invested in pure investment products such as PPF, EPF, gold,

FDs, equity, property, etc; which will yield comparatively much better returns. The appropriate mix would depend on your risk-appetite and time-frame so that they mature when child's higher education or marriage becomes due.

The only point of difference would be that the term policy does not continue if something happens to the parent. This disadvantage is, however, mitigated by the fact that you can buy a sufficiently large cover with a term plan as the premiums are relatively very low. As such, should any untoward incident happen, this huge amount of money received will aid in protecting the child’s future.

Thus, the DIY approach will not only retain all the benefits of a typical child oriented plan but simultaneously give a much higher payout on maturity; besides being hugely flexible.

I am sure you can devote this extra little effort to manage your own portfolio to make sure that your child gets more money...without compromising on the security aspect.

[source:http://www.moneycontrol.com/master_your_money/stocks_news_consumption.php?autono=958258]

Investment Planning for Children’s Future

Every child is precious to their parents. Every parent wishes for their Saving for child to get the best possible education and other amenities. This can be achieved by planning your investments and savings systematically. There are various ways in which a parent can secure their child’s future.

It’s advisable to start saving and investing at an early age, ideally even before you have a child. The earlier you start the more benefits you get, like – long term capital gains, longer term horizon which reduces the risk and also results in a higher corpus.

Now you would wonder how much to invest, where to invest and also how much you should save from your income. To achieve the desired goal for your child you need to save and invest regularly.

Here are a few things which one may consider while planning for a child’s future:

Savings – Savings are crucial when it comes to financial planning, because without savings you cannot invest. Also, one needs to have sufficient funds for emergency purposes; this sum is generally 3 times your monthly salary. This emergency fund can be in form of cash in a savings bank account. Savings should start at a young age and should be imbibed in a person as a habit.

Insurance – No one can predict the future. As the future is uncertain, one should always hedge the risk by insuring oneself as well as their child. This is the part where you need to combine a child plan and a term plan (as a pure protection plan). A children’s plan is crucial, because with ever-increasing inflation, it is necessary to get a child plan which will help in systematic savings as well as financial growth. It is also necessary for the parent to get a term plan which will be helpful to the family in case either parent dies or is rendered unable to earn due to some unfortunate event.

Inflation should always be taken into consideration while planning for your child’s future. Inflation actually erodes your hard earned money. Let us take an example – an MBA today from a reputed management school would cost around Rs.5 lakh. Ten years down the line this amount could become Rs.10 lakh if we take a 7% hike in the fees every year. We have taken 7% as an assumption and a replica for inflation, because over the period of a decade, inflation tends to average at 7%.

Investing – While it is important to save, making your money grow is equally crucial. One needs to systematically invest money in various instruments like fixed deposits, mutual funds, and physical gold.  Investments should be made only after defining the risk appetite. A risk-taking investor may even invest in direct equity while a risk-averse investor may invest in FDs and RDs or even postal savings scheme.

One can either hire a financial planner to make a proper plan for their child’s future or even do it on their own by consulting bank managers, insurance agents and mutual fund advisors.

To conclude, preparing for your children’s future is a simple process – reduce your expenses, increase your savings, invest properly and regularly and get insured early!

[source: http://lifeinsurance.bajajallianz.com/ulipedia/investment-planning-for-childrens-future/]