Most parents buy a child insurance plan to secure the future of their child. These policies have a premium waiver feature whereby even with the untimely death of a parent, the child gets full benefits on maturity.
As beneficial as these plans may be, there are a few very common myths that people have about child insurance plans which are anything but true.
Only the child will get policy benefits
A common misconception is that a child insurance plan only covers the child. This is not always true as most insurers offer policies that provides life cover for the parent as well. Parents can choose the tenure of the policy in accordance to the age of their child. In the unfortunate event of a parent’s demise, the policy stays active and the child gets the policy benefits in due time. Most often, a lump sum amount is received once the child is 18. Some policies also offer regular amounts till the policy matures to take care of the child’s educational needs.
The policy ends with the parents
Child insurance plans are designed to take care of the child’s future even when the parents are not there. Child saving plans come with a premium waiver benefit. In simple terms, it means that even when the parents are not there, the policy benefits remain intact for the child without paying then future premiums.
In case of the untimely death of the parent, most insurance companies provide a certain amount to help the child and any other family member financially during the time of crisis to see through the emergency. When the policy matures, the child gets the maturity benefits irrespective of the death benefit paid earlier on.
The policy is only good for the child’s education expense
A child insurance plan doesn’t put any restriction on where the money is going to be used after maturity. The benefits can be used as and when required. Insurance companies may recommend using the money for the child’s education as it can be expensive however it’s just a recommendation and not a rule or a part of the child saving policy terms and conditions.
The terms and conditions can be confusing
Just like any other insurance plan, child saving policies come with their own terms and conditions. These, however, are not that difficult to understand and clearly mentions the terms and conditions that the policyholder has to adhere to. The tenure of the policy, the premium amounts and the benefits provided are clearly mentioned for any child saving policy that the parent can easily look up for and judge accordingly before buying the insurance policy. In case of any objection to the terms and conditions, the policyholder has the option to return the policy within a specific time after buying the policy.
It doesn’t consider the effects of inflation
Most child insurance plans are unit linked insurance plans or ULIPs. The premiums paid for the child saving plans are invested in the capital market. Once that happens, the premiums paid will grow as per the growth trends in the capital market. Capital market growths being inflation adjusted, automatically adheres the child insurance plans to the inflation rates. Thus, parents don’t have to worry about their child’s future with the growing inflation rates in the market.
Keywords: Child insurance plans, child saving plans
By: Harish Kumar Sharma
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