Importance of Child Insurance plan – Why invest?

Abhishek Mishra

As a parent, you have always desired to give the best to your children. Whether it is education or food or clothing, you have always worked hard to give them the best possible option according to your budget.

When it comes to your child’s higher education it should be no different. After all it is the gateway to bright career and secured future.

However, there are few challenges which many parents face when it comes to crucial stages of a child’s education.

Here are few key things which every parent must keep in mind while planning for their child’s education and future:

Rising cost of education

Over the last few decades, the cost of professional educationin the country has multiplied considerably. The average yearly fees for engineering courses have risen from below Rs.25,000to Rs.40,000 levels in the 90s to around Rs. 80,000 to Rs.2,00,000 or even higher per year currently.

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Same is the case with MBA courses with fees in the range of Rs.5,00,000to Rs. 15,00,000 or more these days. Medical courses have witnessed the steepest hike with fees for private medical colleges anywhere between Rs. 25,00,000 to Rs.1,00,00,000. The education costs in foreign countries would be much higher. Over the next decade these education costs are likely to increase further.

Requirement of huge corpus to fund the child’s desired education

In the absence of adequate funds to finance the child’s higher education, parents often resort to availing huge loans at costly interest rates or even mortgaging or selling their property. Finally if things don’t work out as expected the child would be forced to compromise on his/her desired education due to lack of funds.

Early planning is the key to success

It is said that “A dream without a plan remains a dream”. By planning early and investing regularly for your child’s future one can easily build a huge corpus. As child’s higher education is a long term goal with a huge time horizon, even a small but disciplined investment can add up to a huge amount.

While there are many investment options available in the market to fulfil this goal, a child insurance plan is one of the best option which offers some exclusive advantages.

Most child insurance plans offered assured payouts at pre-determined stages of a child’s education besides a lumpsum payout on maturity.

These assured payouts can be used to fund the child’s higher education in a step by step manner while the lumpsum payout can be used for the child’s post-graduation or marriage. It can be used even as a capital for starting a business or a new venture.

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Secondly, a child insurance plan ensures that the child’s education and future remains unaffected even if something happens to the parent. Due to the inbuilt Premium Waiver Benefit (PWB), the policy benefits remain in force, while the premium liability stops in the event of untimely demise of the parent.

Thirdly and most importantly, unlike market linked investments which are subject to market risks, a child insurance plan comes with a pre-defined benefit (eg: maturity benefit and/or assured payouts) which ensures that child’s future is taken care of under all circumstances.

Views expressed in this article are the personal opinion of Abhishek Misra, CEO & Principal Officer, Bonanza Insurance Broker Pvt Ltd.

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