Tips to buy insurance policy for your child

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CHILDREN enrich lives of their parents and naturally in return parents want to give them the best, especially when it comes to their education and key future milestones. As parents, it is important to consistently save for the many milestones that their children might want to cross in their lifetime.

 

That's where children's future solutions and insurance comes in. Children need insurance for a variety of reasons, primarily for education, studies abroad, marriage etc. Since most of us have relatively fixed sources of income, financial planning for a child's benefit becomes an essential part of the family's budget.

So whether it is an international degree or a specialized training course, most parents would not like to deny it to their children any opportunity, due to lack of funds. Given the steep rise in the cost of education, which continues to climb with each passing year, saving for a child's future is no mean task.

Children's insurance plans are designed to serve a variety of milestone needs and, if chosen well, are excellent long-term vehicles to manage a child's future.

These investments have the ability to beat inflation and thus, match the ever-escalating costs of education. Finally, these solutions have options that protect these future plans in the unfortunate event of death of the parents.

So, how should you choose an insurance plan for your child?

Here are four simple tips: Start planning and invest for your child's future as early as possible: Most insurance companies offer plans with maturity benefits structured to coincide with the child attaining 18 years in age.

These plans offer a long horizon to invest, which helps you systematically build a corpus.

Invest in plans that offer premium waiver benefit:

Most child plans offer premium waiver benefit either as an option or as an essential feature in the main plan. What premium waiver does is this ­ in case of the death of the parent, the insurer waives off future premiums to be paid, while the insurer continues to fund the insurance policy till maturity.

Choose a plan that offers a mix of investment options and adequate risk cover:

Make sure you invest in a child plan that offers a balanced mix of growth and debt funds and a risk cover option. Also, choose a plan that has the system transfer option to make sure your gains in the investment are protected.

Lastly, take adequate risk cover to ensure that the death benefit is a substantial lump sum that can help your family in case of your demise.

Read the product brochure and understand costs of the product:

Insurers lay out the charges that the customer needs to pay for the policy clearly in the product brochure. Compare the products available in the market on their charges, the reputation of the insurer, repudiation rates (available on the websites), flexibility offered and their service quality at perception.

Buying a child insurance plan is a significant step in securing your child's future. We suggest you make it a high-involvement purchase by researching the products in the market, probing the insurance agent on features, charges and past performance.

Happy Investing!!

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