Should You Consider Child Insurance? Is It Worth The Money?

Planning

oi-Sunil

By Sunil Fernandes

Published: Tuesday, March 29, 2016, 10:07 [IST]

These days, we have all kinds of child products that provide for security cover for the child to meet his or her education, marriage etc., at a later stage in life.

But, is this child insurance and coverage really worth it?

You have various kinds of child insurance and other plans for the child. These include, where you get a lump sum money after a certain period. There are other policies, where you receive amounts at periodic intervals, largely at the various stages in the life of a child, where he meets with various expenses.

You can have ULIPs as well, where you can decide whether, you want in debt dedicated schemes, or equity schemes. The latter of course poses market related risks.

In this you can have various ways of coverage, that include the child or the parent. In case, you choose the latter, you get the benefit of premium waiver.

Now, the traditional plans give you more or less returns that can range from 6-7 per cent every year. That is just not good enough. So, what should be the best option in case you do not want to consider child insurance.

It has to be a term plan...

We believe that term plans is much better than a child insurance plans for a number of reasons. Of course, you do not get the money paid back by way of premium, but, the objective is to cover your family,including children and all other dependents. A term insurance on the parents life is much better than a child insurance.

For example, if some thing were to happen to the bread earner, the dependent would get a lumpsum by way of insurance, which would help cover the education and marriage needs of the child.

What is the big deal in getting a premium waiver cover in a child insurance plan, which is really not big enough.

How to go about it?

Just do some basic calculation. Arrive at what are the major expenses likely in the next many years (take 15-20 years), including child marriage, child education etc. To that work on the likely household expenses and add all other likely expenses. For worries over heath, take a separate health insurance cover.

Accordingly, take a term insurance policy on the desired sum. You can closely work with the insurance advisor for the purpose.

Now, if there is any eventuality by way of death to the breadwinner in the family, you have adequately covered all your expenses.

The only disadvantage of course is the fact that you do not get the premium paid back, as in traditional endowment plans. Never mind that. The purpose of insurance is to cover your dependents in time of crisis and you may well do it through a term plan.

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