On this Children’s Day, the best gift that you can ever give your child is a bright future which lies in financial planning at an early age.
The arrival of your little bundle of joy means you’ve entered the brave, new world of parenthood. The very moment you look into an infant’s eyes, you’ll find the stirring of a new life. Look into the eyes of that infant’s parent and you may just find something else: already concerned to give their child the best possible future. All the priorities tend to shift and the only thing that matters is caring for their new born baby.
While as a parent you make sure that your child eats all the healthy food and gets the best education, but have you ever thought who will take care of their financial security and health protection needs when you won’t be around to do it?
On this Children’s Day, the best gift that you can ever give your child is a bright future which lies in financial planning at an early age. When the time is right you need to figure out your child’s needs with respect to higher education, college fees and medical expenses.
Child Investment Plan: Why is it important?
Increased expenses in various aspects of modern life make raising children a difficult proposition. One of the biggest worries for parents today is the education of child. So, for starters make an estimate of when your child will go to college and plan accordingly. College education for your child in a good institute can set you back by approximately Rs 20-30 lakh. These are the current costs, so you need to first estimate how much the education will cost 12-15 years down the line. And a wedding that costs Rs 25 lakh today, would cost nearly Rs 70 lakh 21 years from now at an assumed inflation of 5%.
If you look at the inflation point of view, it’s increasing every year and after 20 years the cost of education and other costs will be very high. This is where the child insurance plans bring a ray of hope in the life of parents as these plans help you to invest in such a way to meetup the future costs more efficiently. Taking a child insurance plans helps to secure your child’s future and ensures that all your child’s needs are met even after you are not around.
Child insurance plans, which are investment-cum-insurance plans, offered by insurance companies are similar to ULIP plans. Although these plans have one difference, i.e. the parents need to invest in child plan right from the time the child is born. You can start by investing within 60 to 90 days of your child’s birth so that you can easily accumulate larger sums that may not be possible if you start in the later stages of life. As per industry experts, the multiplier effect in the power of investing comes from the investing duration as longer time horizons prove to show higher multiplier effect.
Almost all child plans have the same structure but the advantage of ULIP-based child plans is that they come with the waiver of premium feature where the insurance companies take care of future premiums in case of sudden death of the parent of the child. With this, the money keeps growing and the child doesn’t fall short of corpus at the maturity of the policy. If you think the basic plan will not achieve the desired fund for your child’s future, then a child plan with waiver of premium is the solution for you.
The below table is showing the comparisons of Child Plans offered by 4 prominent insurers. The invested amount is Rs 5,000 p.m.
Make your child a part of your health insurance plan
An important part of that new journey is making sure your baby is immediately covered under a comprehensive health insurance plan. By doing so, you can easily take care of the unexpected medical expenses in case of an unforeseen event or a medical emergency. Though it may not be possible to get an individual health cover for the new-born baby, the child can be easily included or added to an existing family floater policy or group health insurance policy. Most insurers typically allow the addition of the new child after 90 days, though the threshold age may differ from one insurer to another.
The policy works just like a normal health insurance plan and provides a comprehensive coverage up to the total sum insured. When adding your child to your existing health insurance plan, it is important that you consider increasing the sum insured. This will provide adequate coverage to everyone covered in the policy. To avoid an excessive increase in the premium due to an increase in the sum insured, you may choose to add a Super Top-up plan with the existing plan. This, rather than increasing the premium, will provide adequate coverage to the family at affordable prices. Many health insurance plans in India that cover the maternity cost automatically add your new baby in the existing plan without any extra premium. Moreover, many of the plans even cover first-year vaccination costs of the baby as a part of the health cover.
The following is a comparative table of 5 leading insurance companies providing Health Insurance of Rs 10 lakh sum insured for a 31-year-old old male, 29-year-old female and 1-year-old kid living in a metro city.
(By Vaidyanathan Ramani, Head-Product & Innovation, Policybazaar.com)