Pros And Cons Of Purchasing A Child Life Insurance Policy
Updated On Nov 07, 2021
A child's life insurance plan, also known as a Child Plan, is a combination of insurance and investment that can help fulfil your children's financial needs. It not only pays out large sums of money, but it also allows policyholders to withdraw money from their savings account whenever they need it. A Child plan is an excellent insurance option for helping your child achieve all of life's milestones. A Child insurance plan allows you to invest in your child's future while simultaneously ensuring that the promised sum is paid out even if one of the parents dies early. Purchasing a separate insurance for their child, on the other hand, does not make as much financial sense for most individuals as investing their money elsewhere.
Pros of Child Life Insurance Plan
As a parent, you will prioritise safeguarding your child's future. Here are a few benefits to consider before purchasing child insurance for your child:
- The most essential benefit of purchasing a Child insurance plan is that it protects your child in the case of a sad incident. In the event that you are unable to care for your children, a decent insurance policy that fits their financial needs will take care of them.
- Child insurance plans are designed to ensure that the child is financially protected at all stages of his or her life. Many child insurance plans feature a maturity term based on the Child 's age, such as when the youngster becomes 18, 21, or 24.
- A child life insurance policy not only provides coverage, but it also serves as a savings account for your child. The lump-sum payment received upon adulthood will be utilised to help your child reach various goals, such as schooling, marriage, and so on.
- Additional perks, such as guaranteed bonuses, surrender benefits, and so on, should also be considered. You can supplement your child's basic insurance plan with riders like income-saving, premium waiver, personal accident compensation, or critical condition.
Cons of Child Insurance Plan
Child plans are criticised by some as having a relatively high cost when compared to a standard term plan. Some of the disadvantages of a Child life insurance plan are listed below:
- These policies perform badly in terms of both life insurance and investment alternatives. You may get very high life coverage for a lower rate by purchasing plain-term insurance.
- Equity mutual funds are the safest investing option. You will invest the most amount feasible in these accounts due to the cheap costs. If a fund performs poorly, you may usually terminate your investment and shift to another fund without incurring any tax. When it comes to children's plans, this isn't conceivable because of the high surrender fees.
- On the expenditure and return fronts, the term-insurance-plus-mutual-fund combination outperforms the children's plans. As a result, it's simpler to pass up these plans in favour of a term plan and a mutual fund.
- Although they provide tax benefits, you may get the same results by combining term insurance and mutual funds. Equity mutual funds are the safest investing option. You will invest the most amount feasible in these accounts due to the cheap costs. If a fund performs poorly, you may usually terminate your investment and shift to another fund without incurring any tax.
Child life insurance policies ensure that your child's future financial requirements are met even if you are not present. Children's life insurance plans, according to advocates, are ideal financial tools for bigger savings and investment portfolios. Opponents argue that children's insurance is a waste of money for most families because it only compensates for lost income.
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.