Why Should I Buy Life Insurance for my Children?

Mr. Shah adored his daughter. Everything he provided for her was the best – clothes from the best brands, best toys and the best education. He even sacrificed buying his dream car just to ensure his daughter’s admission in that prestigious school. He made various investments in mutual funds, bonds, fixed deposits, etc. so that he could create a corpus for his daughter’s higher education. He factored in all the constants, except one variable – death. As luck would have it, he met with a fatal accident that took his life. All his investments were utilized to either pay off his loans or to meet the family’s lifestyle expenses over the course of the years. The education fund, which he thought he had created, was wiped out meeting other financial requirements and his daughter struggled to finish off her studies and jumped into a job to provide for her family. Had he factored in a life insurance policy, the result would have been different.

The life insurance plans pays a lump sum in case of premature death and scores in this area where other investment options fail. So yes, Mr. Shah should have had a life insurance plan. But would that have been sufficient? Like his other investments, what would have been the guarantee that his life insurance proceeds would have been kept aside for his daughter’s use? Wouldn’t that had been too utilized for other purposes?

 A child insurance plan comes in the picture here and would have been the ideal solution if the objective was to secure funds exclusively for the child. But first, is a life insurance policy required for your children?

I know that what Mr. Shah felt about his daughter is a sentiment most of the parents share. Providing the best facilities for the child is everyone’s prerogative. Be it for the child’s higher education, funding the career growth or marriage, finance is required is every step of the child’s life. Inflation is a demon which is ever hungry and at the rate it is rising, the cost of education of your child would come in millions some 15 years down the line. Not only education, if you wish to help your child establish his own business or have a grand marriage, finances would be required. Would your financial planning be sufficient to provide the huge sums of money required? And what would happen if your planning is cut short in case of your unfortunate demise? Where would the required funds come from?

The answer is a child insurance plan. This is a specially developed life insurance plan which insures the life of the parent while keeping the child as the beneficiary. The parent can contribute towards building a fund for his child and if he dies prematurely, the plan remains intact. Insurers generally pay a death benefit immediately on death while the plan continues to run for the stipulated period. There is no requirement of paying the premium and on maturity the maturity benefit is again payable. Thus, the plan secures the fund and makes it exclusive for the child’s future. There are some things which should be borne in mind when investing in a child plan.

• Buy the plan with a tenure which would coincide with the important milestones of your child’s life, like higher education, wedding, etc. so that the maturity date coincides with the year in which funds would be required
• Buy a plan when the child is still young so that saving small amounts regularly for a longer tenure would result in a higher return.
• Buy a plan on your life and not on the child’s life because it’s your financial worth which should be insured as your child has no earning potential
• There are two types of variants of a child plan – Endowment which also comes in a money-back feature and ULIP. Endowment plans are fixed benefit plans which may not hold real value because of inflation. A ULIP would be a good choice as the money would grow in relation to the market index.

So, stop thinking! If your child is precious to you, you should buy an insurance plan for safeguarding his future from financial difficulties. Buy a child plan and earmark the funds exclusively for your child. You may select from a wide providers in India like – HDFC child plan, ICICI child plan etc.