Child Plan or Education Insurance plan – Do I really need it?

Of late you will see and hear ads of a lot of companies (life insurance companies, mutual funds, sometimes even banks and NBFCs, financial advisory companies, etc.) yelling on top of their voice about planning a fund for your child.  The cause they are promoting is definitely good.  But remember that all such plans are not the same.  Specifically, an education insurance plan is very different from all others.

You may need a combination of multiple plans to have a solid foundation for your child.  I am covering that separately. This write-up is more to do with Education Insurance plan, or Child Plan as it is commonly called which are sold by life insurance companies.  Know this product well and how it can fit well into your child education funding goals, before you decide to buy it.

First, understand this!  Don’t get fooled!

Let me first resolve a basic confusion that some life insurance agents have been taking advantage of.

An insurance plan taken on the life of a child (where the beneficiaryon death of the child is the parent) is NOT a child plan.  Some agents sell this to (even well-educated) customers as a child education plan, but such a plan is very far from it.  Such a plan is just an investment plan.  Where is the question of buying insurance with your child as insured?  And what is the need for an education plan if something happens to the child?  Please understand this first.

That is where an education insurance plan (or child plan) comes in.  It ensures that even if you were to die, regular amounts of money is passed on to your family to support your child’s dreams and aspirations.  It also provides for marriage costs, and other expenses.

A real child plan (or education insurance plan) is an insurance plan that ensures that the child is financially protected if the parent dies. Remember that this is an Insurance plan and therefore different from all others which only help you to build a fund for your child over time.  The insurance plan does both fund creation as well as protection.

Child plans are regular premium plans, wherein premium is paid for limited period or throughout the term of the policy.

How are Child plans different from other investments you do for your child?

Cost of Child Education Plans is growing much higher than inflation rate of 5-6%.  In fact, think about it yourself.   School and College fees today would be at least 15-20 times higher for you, the parent, than what it is today.

Source: http://childplan.tumblr.com/post/145202520318/child-plan-or-education-insurance-plan-do-i