Today I will explain, is Child Insurance actually need or not. It is one of the biggest emotional tools used by agents to sell Child Insurance Products. However, when you actually look into the requirement then you may think twice before buying child plans.
First basic thing what I will deal with is, why one need Insurance? It is required when something happens to him; his family may not be in a financial loss. Hence, to protect the loss you need Insurance cover. However, in case of child insurance, insurance required for a father not on a kid’s life (Few child insurance products covers kid’s life risk). So think insurance in view that if something happens to you, how much your child will be in trouble in terms of money.
The major point, what Child Insurance plans offer is “Premium Wavier Benefit”. This benefit will come into effect when the insurer (in child insurance usually parents) dies before the maturity period of a policy. Future premiums, whatever need to pay is totally waived and in some plans your kid will get a yearly lump sum as a maintenance and after the policy year end kid will get as usual benefit. Looks interesting feature. However, if you opted for higher Insurance cover by purchasing Term Insurance then this offer can easily be fulfilled by investing the claim amount into secured avenues. So it is not the one reason or benefit to purchase child plans.
Now choosing Traditional Plans and ULIPs for child plans. Again a lot of drawbacks if you go with either of the products. Traditional Plans may give you low returns and ULIPs have more cost factor attached with them. So, if you purchase Traditional Plans then how can you beat the future Educational Inflation and Marriage Inflation of your child? With the kind of raising educational expenses and marriage expenses, it is not worth to go with Traditional Plans, which may hamper your Child Education and Marriage Expenses. Hence, it is not worth to go with Traditional Child Plans. ULIPs being costly when you compare with mutual funds and may not fulfil your insurance need, which is very much important in case of your untimely demise.
So, it is better if you go with Term Insurance (take equal to the present values of all future expenses of your kid’s-Don’t know your insurance adviser is able to calculate this) and start to invest in options like Equity, Gold and PPF according to your risk appetite. Hope this article made it clear the requirement of Child Insurance.