Children add happiness to their parent’s life, become the future of the country and are the most innocent gift for the world. A child is considered as the purest form of god’s creation and we celebrate children’s day as an accolade to all the children on the birthday of Pandit Jawahar Lal Nehru, the first PM of an independent India, also known as “Chacha Nehru” who devoted a large portion of his life to the well-being of the children. The ideals of Jawahar Lal Nehru were to give love and affection to the children whom he considers as buds in the garden. He saw children as a bright future of the country and the very foundation of the society and children’s day reminds us of the same thing.
Children’s day is also about gifting children who add so much value to our life, society and country. And what could be a better gift than securing your child’s future with a Child Insurance Plan. You do everything to make the future of your child safe and secure, but what will happen to them in case of an unfortunate event like the untimely death of a parent? Considering the rising cost of education which has risen to 175 % from the year 2008 to 2014, financial uncertainty can become a disaster for your children. But a child insurance plan makes sure that all the needs of your children are fulfilled even in your absence, so plan to buy on children’s day.
Let us look at answering the top 6 questions related to a Child Insurance Plans.
1. How a Child Insurance Plan Beneficial?
A child insurance policy is an investment cum insurance plan which is designed in such a way that it meets the financial need of your children when required. You pay regular premium in your child insurance policy, which grows over time and you can withdraw it when your child reaches adulthood.
Following are the key features of a child insurance plan
- Accumulate fund for future need of your child
- Death Benefit and/or Maturity Benefit
- Option to add a waiver of premium rider and other riders
- Flexibility to choose your term, according to your child’s age
- Option of partial withdrawal to fulfill your child’s requirement
- Allowance of deciding your premium amount based on budget
2. What is the Ideal Policy Term Under a Child Plan?
You should always choose the right term for your child insurance policy, so that your child will be benefited at the right time when required through the maturity benefit of the policy. You should always consider different factors like the marriage and education of your children while choosing the policy term. For example, if your child is 2 years of age and you want to buy a child insurance plan to collect adequate funds for his higher education, then the ideal term would be 18 years (the age of your child when you need the funds) minus 2 years (current age of your child).
3. What are the Types of Child Insurance Plans?
While choosing a child insurance plan, you have the following two options:-
Traditional Child Plan– This plan gives you the benefit of saving and insurance. You receive the maturity benefit with bonus upon the maturity of the policy and your child receive the death benefit in case of death of the policyholder. It gives you a safe investment option for the premiums you pay as the investment of the premium is decided by the company, not by you.
Unit Linked Child Plan– This plan offers you investment options such as stocks, bonds or mutual funds with an inbuilt insurance benefit to cover your child’s future in case of your premature death. You get a fund value upon maturity which is equal to your investment fund. This plan allows you to choose your investment, according to your risk appetite.
4. What is a Waiver of Premium Rider and its Importance in a Child Insurance Plan?
A waiver of premium rider allows the policy to continue even after the death of the policyholder without paying any premium till the maturity date and the child receive both the death benefit (at the time of death of the policyholder) and the maturity benefit (at the time of maturity of the policy). After the death of the policyholder, the premium is funded by the company till the maturity period and that’s why it is called waiver of premium (waiver of the policyholder’s obligation to pay the premium). Most of the child insurance plan comes with an inbuilt waiver of premium benefit, but if it has no such benefit then you must add a waiver of premium rider to it. It will allow your child to manage financial need in case of your demise and fulfill his future needs with maturity benefit as well.
There are other riders available with a child insurance plan like Critical Illness rider (provides cover for specific illness during the policy term) and accidental death benefit (cover in case of accidental death during the policy term), which you can add as per your need and requirement.
5. How a Child Plan works?
Let us understand the working of a child insurance plan through this example of HDFC Life Young Star Udaan Plan.
Dr.Chirag, a 35 year old surgeon bought HDFC Life Young Star Udaan for his son Ishaan who is 3 years old. He wanted his child’s future to be financially secure so that he can fulfill all his needs. He bought the policy with a wavier of premium rider with a 15 year term by paying premium for 10 years with a sum assured on maturity of Rs.5 Lakh.
So, when Ishaan will turn 13, he will start getting payouts (15% of sum assured on maturity every year) which will help Chirag to cover Ishan coaching cost and this payout will continue till Ishaan turns 18 and then he will get a lump sum amount of maturity which will cover his college expense.
But things didn’t go as per Dr. Chirag’s plan because he met with a severe accident and died before being taken to the hospital at the age of 40 years. But even with this unfortunate event, Ishan’s future wasn’t hampered, as under HDFC Life Young Star Udaan, the future premium were waived and the payouts for Ishaan continued as per Chirag’s Plan and his family received a lump sum amount immediately as death benefit.
So gift your children on children’s day a secure future by buying the right child insurance plan which will fulfill all his financial needs when required. Don’t let the rising cost of education and uncertainties related to life, to hamper your child’s future, because they are a blessing for your life and the future of our country.