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Life Insurance - Protect your child's present & future through insurance

21 Jan 2013

Whats in it for you

They say that the child is the father of man. But the father has to take care of some aspects in a child’s life to secure him from any mishaps. There are so many dreams we weave for our children — some are irrational as well. For the rational ones — good education, a grand wedding and protection from any harm that might befall them — there are insurance policies that take care of the needs.

Most often we will keep on wondering if we have taken the right decision or not about the financial decisions we have taken for them. That is all but natural. But on a normal route, you may chose to pick the following thumb rules to secure your child’s future

Protect yourself against risks:

The first policy in your portfolio should be a term policy. It is a pure life insurance cover policy. In case of an unfortunate event of death of the parent, the beneficiary is entitled to receive the guaranteed sum assured immediately. This kind of product will ensure that the child can continue to live the same way and does not leave his studies mid-way. In addition, there are plans today that will continue to operate the unit account until maturity of the policy. All future premiums in such cases are paid by the company on behalf of the life insured until the policy matures thereby, ensuring that the purpose for which the policy was originally purchased is accomplished.

Tenure:

The best way to build up a healthy corpus over the long–term is to start investing early. Investing smaller portions of the savings at regular intervals goes a long way in building a healthy corpus. Parents also benefit from the compounding effect (the interest keeps getting added up to the principal), which increases over time.

In short, the following points should be kept in mind while purchasing a child insurance plan:

>> Time frame for building a corpus.
>> Age at which the fund would be required.
>> Amount required to build the desired corpus.

Returns:

If you need returns on regular intervals to fulfill various obligations for the child, an income-benefit rider, in case of the death of the parent, can provide a regular pre-determined income at every future policy anniversary to meet the present education expenses. These are either conventional endowment plans or unit-linked insurance policies (Ulips), which aim to generate handsome returns over and above the insurance cover for the earning parents. Life insurance plans are also the only financial instruments that provide multiple fund options in just one instrument, allowing one to choose as per their risk profile. These plans also allow partial withdrawal facilities to help enhance your child talent.

Regular systematic investments in such a product helps enhance savings over the long term and provides guaranteed commitment to the child’s educational goals, professional career and overall financial well-being. Over the years, insurance companies have sought to crack the child insurance puzzle, launching varied products targeted at this underpenetrated segment. The very fact that the untimely demise of an earning parent can put a spanner in the wheels of the child’s progress has been instrumental is raising awareness about child plans. Most plans launched till date have catered to the simple desire of a doting parent to secure his child’s financial future.

However, with times changing, it is becoming increasingly important to understand the consumer’s needs more deeply, identifying specific needs — thus going well beyond education and profession — and facilitating the overall development of the child is crucial in exploiting the tremendous potential of the child insurance segment.

What drives parents’ investment decisions?

Parents are discerning about their children’s needs and want to provide them the best facilities. But, in this age of constantly evolving needs where academics is just a cog in the wheel of the child’s overall career growth path, parents are prone to reject plain vanilla products focused just on education and profession.

The realisation that success in today’s world is multidimensional, has resulted in parents demanding product value additions. This is more so for parents who understand that all-round development of the child is a success enabler and products must be tailored to meet the specific needs of the child. For instance, if a child is a blossoming cricketer or an exceptionally talented singer, then a product which focuses just on academics serves no purpose. Parents of such a gifted child would ideally invest in a plan which provides the scope to enhance the child’s talent.

As a parent, you wish to provide the best to your child. A child insurance plan helps meet this objective and holds the key to securing a child’s future. In-depth research of insurance products and careful assessment of future needs remain important tools to enable you as a parent to get the ideal plan for your child.