Insure child against future educational, financial risks

Child insurance plans take care of their required educational costs and future financial needs if anything happens to the earner in the family. Slightly different from normal insurance policies, the child policies will pay compensation to the insured twice. Read on how to insure children against future risks.

Hyderabad : The cost of higher education is increasing day by day. When all goes well, investments and education loans can be used to meet these rising costs. But, if something unexpected happens to the earner in the family, all plans will be derailed. Always be careful to avoid such a situation. Insurance protection should be provided for the future financial needs of the children so that there is no problem.

Investments should be made in PPF, mutual funds, shares, real estate, gold etc for the higher education of children. Choose a life insurance policy. There are also policies available specifically for the needs of children. Insurance companies offer these policies with the aim of providing funds for children's education in case of unforeseen circumstances. These are slightly different compared to normal insurance policies. The policy pays the sum immediately when something happens to the insured. After that, the insurance value is paid again after the expiry of the period.

The main thing to say about child insurance policies is to get twice the compensation. The insured provide immediate compensation to the nominee in case anything happens to the policyholder. After that, the insurance company pays the premiums on behalf of the policyholder till the policy term is over. This means that the policy will continue.

After that, it will once again pay the policy value to the nominee as soon as the period ends. This will ensure the availability of funds required at different stages of the two children. In most of these policies, the duration is determined according to the various stages of the child's needs - higher education, marriage and other expenses.

Endowment plans and unit-linked insurance policies (ULIP) are also available in children's policies. Those who want to take less risk can look into endowment policies. In this, the insurance company offers bonuses and loyalty additions. The return can be up to 5-6 per cent. ULIP investments are more likely to be in equities. Equity funds in ULIPs can be chosen when children are expected to need the money only after another ten years.

Savings and investments should be prioritized keeping the future in mind. Make plans to provide financial security to your dependents after marriage. Especially after the birth of the children, protection should be provided for their 21-year-long financial needs. All may not be possible with investments alone. Anticipate unexpected situations, think accordingly and take a decision.

Everyone should ensure that they have a life insurance policy of at least 10-12 times their annual income. Over 15-20 per cent of the income should be invested for the future needs of the children. Only then will there be a possibility of wealth creation in the long run along with financial security.