- With an early start you stand to benefit from the power of compounding
- It’s essential to choose a cover keeping inflation in mind
- The right tenure ensures you’ve the funds when your child needs it the most
- While buying a child life insurance plan, it’s crucial to look at features like life cover and waiver of premium.
As a parent, you want to give the best to your child. Meticulous financial planning ensures that your child has the best education, emotional independence, and a secured future. Child life insurance plans make sure that your child is not left in the lurch, lest you succumb to the uncertainties of life. However, there are certain things that you need to keep in mind before buying a child life insurance plan.
An Early Start – The Key to Success
An early start is the key to a strong and secured financial future of your child. Ideally, you should purchase a child insurance plan when your child is born. This has twin benefits:
- It helps you take advantage of compounding
- The premiums are low
Hence, buying a child life insurance plan early reaps rich dividends in the long run.
Choose a Cover Keeping Inflation in Mind
Inflation erodes the value of wealth. Hence, it’s essential to choose a cover factoring in inflation. For example, if the present cost of higher education is ₹10 lakhs, assuming an inflation rate of 5%, the same would cost you over ₹26 lakhs, 20 years down the line.
Hence, it’s essential for you to choose a cover that beats the effects of inflation and keeps your child’s dreams and aspirations on track. A sum assured 15 to 20 times of your current income will help you mitigate the risk of inflation.
A careful choice of policy tenure is crucial to plan and address your child’s financial needs and goals. Suppose your child is 8 years old and you are sure that he/she will pursue higher education by 18, ideally you should choose a 10-year policy term, that would give you the money when your child needs it most to shape his/her career.
In India, generally, children enrol for graduation by the time they turn 18 and pursue a Master’s degree by 21. However, there are exceptions as some may take a couple of years extra as they prepare for various competitive examinations. You should choose the tenure of your child insurance plan by keeping in mind the present age of your child and the number of years he/she will take to reach a milestone.
Allocation of Funds
While traditional investment avenues offer a pre-determined amount, they can’t combat the rising cost of education, healthcare, etc. Hence, it’s essential for you to opt for market-linked child insurance plans that help you stay ahead of inflation. You need to wisely choose the allocation of funds based on your risk-appetite.
For example, Exide Life Wealth Maxima - Maxima Child gives you the option to choose from 6 funds with a varying degree of risk level. It gives you the option and flexibility to invest in equity and debt funds. When young, you can take some more risks in pursuit of better returns.
Look for Essential Features
While zeroing-in on a child insurance plan look for essential features such as life cover and waiver of premium. In child insurance, the parent is the life insured and the child is the nominee/beneficiary. A life insurance cover ensures that your child receives the lump sum, to be used for future expenses, in case of your demise during the policy term.
Waiver of premium ensures that in case of your death, your insurer waives off all the future premiums, keeping the policy intact. These features secure your child’s financial future against the odds.
Flexibility of Customisation with Changing Requirements
Needs change as your child grows. Hence, it’s essential for you to find out whether your child insurance policy gives you the flexibility to customise it with changing requirements. For instance, there may be occasions when you need to make partial withdrawals for education. Find out if your policy offers you the flexibility to do so.
Know if there’s a provision to increase the sum assured or the tenure depending on the needs of your child from time to time.
Exide Life Insurance offers a host of child insurance plans that help you plan and secure your child’s financial future. Learn more about our child life insurance plans here.