WHAT is the most important financial goal of an Indian? For some, it would be owning a house while for others it would be financial freedom after retirement. But for most, giving their children a better future is their top-most priority. Indians are ready to sacrifice their present and future well-being if that results in a better career for their children.
So, what is the best way to make a provision for the higher education of your child? Some may suggest recurring deposits in banks. While deposits can give assured returns, untimely death or permanent disability of a parent will affect the child’s career.
Many will suggest investing in mutual funds as long-term returns from these can be very attractive. However, you may need to switch funds as per market conditions and there are market risks. So, when your goal is as sensitive as giving your child a good education or meeting your daughter’s wedding expenses, should you leave anything to chance?
India is a lower middle income country. In terms of per capita income, we rank 133rd globally! But, Indians dream of giving their children a better life. And that is possible only through life insurance products designed for children’s benefit.
Children’s life insurance products are mostly based on life cover for the parents.
The money is available when the child needs it for higher education. The most common product is children’s money back plans. Here, a certain proportion of the sum assured is available every year, starting from the policy anniversary just after the child attains the age of maturity. Usually, the first money back installment is of much higher value than the subsequent installments.
This is because the first year fees of a professional course is higher than the subsequent years’ fees.
What will happen if the life assured dies within the policy term? The parent’s goal of giving the child quality higher education will be fulfilled by the insurer, i.e., money back installments will be paid to the beneficiary. Also, the nominee gets an amount equal to the sum assured plus vested bonuses.
What if the parent becomes permanently disabled due to some accident or disease? Then also, all benefits are paid by the insurer and future premiums are waived off by the insurer.
There is no upper limit on the maximum insurance you can take for your child. Another important feature is that you can take a loan against the policy once three full years’ premiums are paid.
With life spans increasing, price of insurance has also come down. People must give a serious thought to buying insurance for the benefit of their loved ones. Children’s money back and other children’s plans are one of the best ways to ensure that a parent is able to afford expensive higher education of children when the time comes.
The writer is manager (legal), Asansol Division, Life Insurance Corporation
Children’s life insurance products are based on providing life cover to parents
The money is available when the child needs it for higher education
There is no upper limit on the maximum insurance that you can take for your child
If the insured parent dies during the policy term, insurer will pay all benefits to the child and future premiums will be waived off
One can take a loan against the policy once three full years’ premiums are paid