Pros And Cons Of Life Insurance For Children In India

Life Insurance Plans for Children

Children’s life insurance plans resemble regular life insurance, but the key difference lies in the total benefits. These plans boast substantial returns, offering intermittent pay-outs and benefits. Parents find themselves drawn to these plans, envisioning a secure future for their children or fulfilling their own financial needs. With government support and insurer discounts amplifying returns, child life insurance plans stand out. However, beneath the surface, there are nuances worth exploring.

Pros of Child Life Insurance

Assured Returns

Life insurance ensures guaranteed returns upon maturity or when a claim is raised. This provides a safety net, ensuring that if the premium-paying parent faces an untimely demise, the child and dependents can continue their lives without financial worries.

Low Premiums

Despite the high coverage of child plans, the premium remains manageable. However, this favorable aspect applies primarily to plans without a moneyback policy.

High Return Investment

Child life insurance plans offer returns among the highest, coupled with capital protection. The extended investment duration and tax savings inherent in these plans contribute to their lucrative nature.

Education And Backup Funds

Life insurance returns can serve dual purposes, including funding the child’s education. In some cases, the primary motivation for purchasing life insurance is to create an education fund. If education expenses are covered, the funds can serve as a valuable backup for the child’s future.

Cons of Child Life Insurance

Expensive for Families with More Than One Child

Despite low premiums, child insurance plans can accumulate significantly for families with multiple children. Allocating funds for each child may disrupt the family budget, potentially leading to cutbacks in lifestyle-related expenses.

Other Investment Plans Offer Higher Returns

While insurance provides returns up to 110% or 115% of the total investment, alternative investment plans can yield even higher returns. Considering the extended investment duration and interest compounding, these alternative plans may outperform child life insurance.

Lack of Instant Liquidity

In times of financial emergencies, the liquidity of an investment can be crucial. However, insurance liquidity is relatively vague, with claim procedures taking at least a month for cash disbursement. Loans with life insurance as collateral also entail prolonged processing times. In contrast, conventional schemes, especially those from banking institutions, offer instant liquidity.

Making Informed Choices

Understanding these pros and cons offers valuable insights into the viability of child life insurance plans. Opting for profitable covers is crucial, and to assist in this decision-making process, plan customization calculators prove beneficial. Leading life insurance calculators enable users to add or remove covers, allowing the creation of a tailored plan without paying for unnecessary coverage.

In conclusion, child life insurance is a nuanced financial tool with both advantages and drawbacks. Assessing individual needs and financial goals is essential in determining whether this investment aligns with your objectives.

Frequently Asked Questions (FAQs)

1. Are child life insurance returns guaranteed?

Yes, child life insurance plans provide assured returns upon maturity or when a claim is raised.

2. How do child life insurance premiums compare to other plans?

Despite high coverage, child plan premiums remain relatively low, especially for plans without a moneyback policy.

3. Can life insurance funds be used for purposes other than education?

Absolutely. Life insurance returns can also serve as a backup fund for the child's future needs.

4. What challenges do families with multiple children face with child insurance plans?

Families with more than one child may find child insurance plans expensive, potentially disrupting their budget.

5. Why consider alternative investment plans over child life insurance?

Other investment plans may offer higher returns, exceeding the returns provided by child life insurance.