Academy of BFSI,

Child Insurance: a Legacy to Leave Behind

Children are always a bundle of joy. Right from the time they enter your life, all grown up and independent your children are your pride and bliss. Every responsible parent looks for the best of everything for the upliftment of their children. They can go that extra mile to see to it their wards become a Success.

Why should you save for your children?

If you want to nurture your infant, pay for his /her school, college fees you need to spend money. If you want your child to have a better and brighter future and career, you need to devise a financial plan for your child’s future. Life Insurance stands out to be a better alternative.

The biggest financial worry most Indian parents face about mitigating the overwhelming and ever-increasing cost of education. According to a survey conducted by the national sample survey office, the cost of general education has shot up by a staggering 175% between 2008and 2014. At the same time, the cost of professional and technical education has risen by 96% taking this account, it has become critical for parents to plan for their children’s education.

Question is that how do you plan? for your child’s future. There are many options to fulfill the child’s need for example investment in equity, bank fixed deposit, mutual funds, but all of them have their own pros and cons. While your investment might yield you a considerable corpus to provide for your child’s future expenses. What would happen if you face premature death? How would you secure your child’s future then?

A child insurance plan comes into play in these situations. The plan provides an avenue of investment for the child’s future and guarantees the promised corpus even if parents die. Child insurance plans come with the dual benefit of insurance and investment. Buying a child plan with interim or terminal bonus, as per the need, can help you plan your child’s future with security. Some of the plans offer a reversionary bonus that is compounded every year, which can help in getting a bigger corpus. On the other hand, a child insurance plan offers a lump-sum payment on the death of the policyholder, but the policy does not end. All future premiums are waived off and the insurance company continues investing this money on behalf of the policyholder. The child gets the money at specified intervals as planned under the policy. In this way, the parent ensures that his child’s needs are taken care of even if he is not around.  Investing in a child insurance plan will entitle you to tax deductions for the premiums paid as per Sec 80C of the Income Tax Act, 1961.

As far as the right time to buy a child’s plan comes into mind time is when you buy a child plan is an important factor for the policy to be effective in terms of premium paid and the returns. Just like any investment to grow substantially, child plans taken for a longer duration pay better whether traditional or ULIP. Since the maturity date of these plans is fixed, it is better to buy these when the child is still young. This gives ample time for the funds to grow. Buying a plan early in the child’s s life also makes premiums for the plan manageable and affordable for a decided upon corpus. Premiums for generating the same return rise with every year delayed. With that in mind, if the child is already in teens, child plans may not be a very effective means. It is better to go in for other investment options along with a pure protection plan

According to the survey done on parents who have purchased insurance for their children, it has been found that these parents become relieved as their burden on education and marriage cost minimizes. And when the maturity period ends, their child can use this money wisely. So, it’s your turn now to give your best just like your parents had done for you to your child’s dreams of an ideal career, dream wedding, capital for business and so many other specialized needs that children have from time to time.

Dear parents,

Its time to remember, one thing about time, that is time runs very very fast. We will not even know when our children grew up, and in dire need of money for marriage, business, education, etc. etc.

I remember a statement from SBI chairman,” Best time to plant a tree was 20 years before, the next best time is now.”.So I am reminding parents especially here that, time to buy a child policy or policies right now and now only.

You don’t buy life insurance because you are going to die

but because those you love are going to live”

I thank Professor Paramesh for valuable inputs

About the Author

Mr. Vijay H Kakhandki has a diversified work experience of 19 years. He has worked with leading Insurance Companies including PNB Metlife, Reliance, Bajaj Allianz Life, Max-Life, in multiple capacities. Currently, he is associated with MABFSI since June’16 as Faculty with Life Insurance vertical.

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