Child Life Insurance Plans: What You Should Know
Published On Mar 15, 2022 10:15 AM By InsuranceDekho
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Child insurance is a type of life insurance that offers both life insurance and financial opportunities to policyholders. With the help of this insurance plan, parents may safeguard their children's future while also developing an investing portfolio to help their children achieve significant life objectives. A parent is the policyholder, while the child is the beneficiary, in the case of a child insurance policy.
Child Life Insurance Plan
A contract with an insurance company for a child's life insurance policy is identical to an adult's life insurance policy. Premiums are paid (often monthly or annually) in exchange for the promise that the insurance company would pay a death benefit if the kid dies. When it comes to adult insurance policies, the policyholder is usually the insured person—the individual who is protected by the policy. A child is insured under a policy for a child, but the policyholder is a parent, grandparent, or legal guardian. If the covered child dies, the policyholder can also be the beneficiary and get a settlement.
Whole life insurance policies for children are common, as they provide coverage for the rest of their lives as long as premiums are paid. Premiums are normally guaranteed, which means they would not go up over time. In addition, a portion of the premium goes toward accumulating cash value, which can be retrieved at any time while the child is alive. A child cannot be covered by a term insurance life policy, which only provides coverage for a set number of years. If you acquire a term life insurance policy for yourself, you may be able to add a rider that covers all of your children until they reach a specific age, at which point the coverage will most likely be changed to permanent policies for them at an additional fee.
Things To Consider Before Buying Child Insurance Plan
1. Presents a variety of Advantages
A Child Insurance Plan not only helps the policyholder build a financial foundation for their child's education, but it also provides a variety of other benefits. A policyholder can make a partial withdrawal from certain of these insurance plans, which might help them deal with financial difficulties. Furthermore, some of these insurance plans have premium waiver options, which allow the insurance provider to waive any remaining premium payments if the policyholder dies prematurely during the life of the policy. As a result, the child is financially safeguarded even if the parent is not present.
2. Pay-Out Alternative
A kid insurance policy usually offers two payment options: a lump sum and regular payments. The policyholder receives a substantial sum of money all at once under the lump sum pay-out option in order to take care of your child's key long-term ambitions, such as higher education and marriage, both of which demand a significant sum of money. A regular payment option, on the other hand, ensures that a child's immediate needs are met, such as learning new skills or paying entry fees for new academic sessions.
3. Variety of Child Insurance Plans are Available
A kid insurance plan can be purchased as an endowment plan or as a unit-linked insurance plan (ULIP). A kid endowment plan is a type of savings instrument that normally provides fixed guaranteed returns. A portion of the proceeds from a Unit Linked Child Insurance Plan is invested in the stock market to help the policyholder grow wealth. In essence, this method aids the policyholder in obtaining inflation-adjusted profits. Depending on one's risk tolerance and preferences, one can choose one of the above-mentioned programmes.
4. Premium Waiver Benefit
A Waiver of Premium Benefit is often included in child life insurance plans, which means that if the life assured, i.e. the kid's parent, dies during the policy term, all future premiums are waived and the policy continues. You can ensure that your child has the financial means to attain their goals this way.
It is vital to double-check the sum assured before purchasing a child insurance policy. The expense of education is rapidly rising, and by the time your child graduates from high school and enters university, you will have spent a significant amount of money. As a result, you must select a set amount that will financially aid your child in continuing their education.
Also Read: Is it Worthwhile To Invest In Life Insurance Riders?
Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.