As a first stage of financial safety and security, a young couple generally go for an endowment policy for themselves. Those who are more return-conscious decide to go for large sum assured under any term insurance plan with health and accident riders. However, many tend to procrastinate thinking about financial security for the most loved one i.e. the child and in most of the cases in the event of the unfortunate loss of either of the parents the most difficult situation is in regard to pursuing education which has been growing costlier and costlier day by day. In such a situation treading the planned growth path becomes impossible, a budding career gets shattered before it is ready to bloom. With this the dream of the parents also come crashing on the difficult road to recovery.
Insurance companies in India have launched several carefully-crafted child policies which primarily provide financial protection to the child through life insurance cover on the life of the father or mother.
The most common feature of such policies is the fact that on the unfortunate demise of the father or the mother the policy contract does not end. The premium, in most cases, is not required to be paid any longer. The benefits under the policy, however, continue to be paid as stipulated in the original contract. Under such policies the premium payment stops and periodical benefits start accruing.
Most of the child benefit policies provide for payment of periodical installments of a fixed amount when the child joins a professional course. This amount is expected to help her in meeting expenses such as college fees and cost of living in hostel etc. A lumpsum installment is also paid when the child attains the age of 18 years. He is expected to need lots of money for seeking admission in any professional course. Another lumpsum amount is provided around the age of 24 years to help the child manage heavy expenses required for start-in-life when she takes up a job and settles down to start her own family.
The essential spirit of the child policies is, therefore, not accumulation of funds or gradual savings but it is to ensure that the flow of fund remains intact when it is needed to enable a young child to chase her dreams in as dignified a manner as she would have been doing had the father or mother been still holding her hand. The value of insurance is realised at its best in such circumstances only.
The products in the market have minor variations, but they all tend to ensure uninterrupted career progression even if the worst strikes a happy family. Today, students face not only the challenge to get a degree, but the complex challenges of what to add to their degree in order to stay ahead in career and life. Education of the child is not the only unfulfilled commitment of a deceased. Hence any other corpus of fund received from insurance, provident fund or any other saving gets extinguished in repayment of housing loan, car loan, holiday loan etc. leaving aside either a small sum or sometimes nothing for fulfilling the most cherished of dreams. A tailor-made insurance solution for education of child is, therefore, highly desirable for young couples with one or two children.
A few other factors also reinforce the aforesaid view. The current generation of workforce faces the challenge of burnout syndrome. In many industries, including the IT industry, desktop facing youngsters tend to develop serious health issues and may not be earning uninterruptedly till the age of 60 or 65 years. Their income may stop much earlier. These days more job opportunities are being created in the private sector where holding on to a job for long is going to be very challenging.
Several new threats to health are also being noticed apart from growing incidence of accidents and the threat of terrorism that is affecting places of work, travel or even worship. All these should naturally heighten people’s awareness of the need to buy a child protection policy as soon as the child arrives in the family and adds wealth of happiness. This wealth must be protected by deciding to buy a suitable child protection life insurance policy before it is too late.
The writer is former MD & CEO, Star Union Dai-ichi Life