Should Parents Get Life Insurance For Their Children?

Introduction

The COVID-19 pandemic has acted as a “wake-up call” to many regarding the importance of life insurance. It’s been one of the most popular subjects of conversation at family dinners. Life insurance can provide a financial safety net for loved ones who rely on you. 

There may be further reasons for insuring youngsters. However, it makes little sense for all families to spend money on this type of coverage. Child life insurance can ensure your child’s future insurability and help them get off to a solid financial start. Before you determine whether it’s the best life insurance choice for your family, learn about the benefits and drawbacks of life insurance for children.

Importance of Life Insurance

According to recent estimates, there are around 360 million policyholders in India. Meanwhile, the insurance business is predicted to grow by at least 12-15 percent over the next five years, showing that a significant section of the population remains uninsured. India’s insurance industry accounts for only 1.5 percent of total global insurance premiums despite its vast population. It clearly shows that most Indians have an urgent need for insurance coverage. If you are considering obtaining life insurance, consider the following solid reasons:

  • Low Cost of Insurance to Youngsters: Purchasing life insurance at a young age would indeed save you a lot of money. If you are younger, your insurance policy will be less expensive. So, even if you are unmarried and have no close dependents, consider purchasing insurance. Single persons are frequently expected to provide financial assistance to parents or relatives. Another issue to consider is insurability. If you are young and healthier, you will be more likely to qualify for insurance. As a result, you may be able to receive the most affordable insurance coverage rates.
  • Financial Assistance for Your Child’s Life Goals: Everyone wishes for stable finances that will come in helpful when it is most needed. With the right life insurance policy, you can build a corpus that can help your child’s future life ambitions. It is critical to purchase a life insurance policy that can enable you to meet your objectives.
  • Maturity Benefits: Life insurance products that offer maturity benefits can also be used as savings vehicles. If the insured does not file any claims during the policy duration, the premium is invested and returned as a larger corpus at the policy’s maturity. As a result, your life insurance policy may include both savings and protection components.
  • Death Benefits: Individuals can get life insurance to protect themselves and their relatives in the case of the insurer’s untimely death. The insurer pays the contract’s guaranteed sum plus any applicable bonuses. It is known as the death benefit.
  • Higher Tax Savings: You can expect to save money on taxes with your insurance coverage. Under Section 80C, life insurance premiums are always eligible for the maximum tax deduction of Rs.1.5 lakh. Section 10 (D) of the Income Tax Act of 1961 may also entitle you to tax-free earnings at maturity or demise.
  • Coverage Against Liabilities: To accomplish your ambitions and achieve your goals, you may have required financial assistance in the form of mortgages or other types of debt. Managing such liabilities, whether it’s student loans or credit card debt, can cause considerable financial stress if you don’t have a steady source of income. Although you may have the funds to pay off a portion of your loans today, your dependents may find it difficult to bear such commitments if you die unexpectedly owing to revenue loss. As a result, acquiring life insurance ensures that your dependents can cover your loan payments even if you are not present.
  • Peace of Mind: We are all concerned about providing protection to our family because death is an unavoidable aspect of life. Your dependents will rely on you both throughout your lifetime and after you die. Put your fears to rest by purchasing life insurance coverage. Your insurance policy will safeguard your family in all scenarios. It can help you replace lost family income, pay for your children’s education, or even provide financial security for your wife if you die.

Why take a child insurance plan?

As earlier said, a child insurance plan is an excellent tool for assisting you in financial planning for your child’s future. The advantages of child insurance greatly surpass any concerns you may have about the effectiveness of these plans. These options are intended to assist you in meeting your child’s higher education fees.

If you cannot secure the funds needed for your child’s higher education, a child plan will come to your aid. It will provide you with a much-needed break, allowing you to put your money to better use. Furthermore, a child insurance plan can help with financial planning for your child’s education by providing a financial cushion in the event of their parent’s untimely death. In such a circumstance, the insurer waives the remaining premiums, and the insurance stays active, ensuring the child’s future security.

Before investing in a child plan, determine the required sum assured for your child, taking into account future inflation and the probable costs of the course your child intends to pursue. The force of compounding will assist you in building a substantial corpus for your child’s future. As a result, it is best to begin investing in a child plan as soon as your kid is born.

Plans To Consider For Your Child Insurance Plan

Planning for your child’s long-term and short-term requirements is a difficult task. However, the availability of a wide range of investment options nowadays has simplified selecting the best solution. Some of the choices for securing your child’s future are as mentioned:

  • Term Insurance: A term insurance policy provides coverage for a set period. Some insurance firms even offer plans that cover you and your child. A few other companies allow you to build your child’s insurance policy to his specific requirements. With such measures, you can ensure that your child is safe throughout childhood.
  • ULIPs: Unit Linked Insurance Plans (ULIPs) blend of insurance and investing elements. These programs allow you to invest in a range of mutual funds, including equity, debt, and balanced funds. As a result, you can tailor your investments to your child’s specific requirements to achieve various long-term goals for your child, such as schooling, marriage, and so on.
  • Child Plans: There are several child plans like ‘ABSLI Child Future Assured Plan,’ which provides guaranteed rewards for taking care of your child’s crucial milestones – Marriage and Education. You can choose such already curated plans and make your investment plans a bit easy and focused. 
  • Mutual Funds: Mutual funds invest your money in many possibilities such as stocks, bonds, and so on. These funds are professionally managed and are less risky than investing directly in the stock market. A well-managed fund has the potential to generate good long-term returns, which can help you protect your child’s future. Most of these funds are open-ended, which means you can make money anytime your child requires it.
  • Fixed Deposits: You can also invest in fixed deposits. When you invest in these deposits, your money is locked in for a set length of time, and you earn interest on it. You can use fixed deposits to satisfy short-term goals for your child, such as schools, extracurricular activities, and so on.

Conclusion

Life is unpredictable, and having life insurance gives you peace of mind that you’ll be financially protected if something terrible happens. You may not rely on your child for income, but you should have a plan for final expenses and medical bills. 

You may wish to take time off-work to care about your family. Life insurance can let you focus on your loved ones while giving you one less thing to worry about during a tough time, and child plans are an excellent way to secure a child’s future. 

With savings and protection being equally significant in today’s society, a solid investment strategy should include an insurance plan to live a comfortable life without worrying about the child’s future.

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