Authored by Anjali Malhotra

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Parents want to do everything they can to secure the future of their children for a better tomorrow. Today, successful parenting comes with its own set of challenges. As an informed parent, it is imperative to plan for your child’s future and start apportioning funds through meticulous saving habits to create a corpus. It is equally important to relish every moment of your child’s desire and nurture his/her passion.

Investing in a child insurance plan might seem confusing to start with because a child does not have an insurable interest, liabilities, or dependents. However, there is a misconception that the child’s life is to be insured. The truth is that in a child plan, the parent is the life assured while the child is the nominee! Child insurance plans offer financial peace of mind so that you can focus on the child growing up years and not worry about the finances.

It provides the dual benefit of investment and insurance. The plan gives you the flexibility to decide the maturity period, which you can select around the important milestones of your child's life. Child insurance plans create a fund of the desired amount to be drawn upon at regular intervals to cater to multiple needs such as education, marriage, etc. The premium you pay towards the plan is invested in different instruments to grow over a period of time. The insured is handed the lump sum amount at the time of maturity.

Many people also believe that once they opt for a child insurance policy, the premium amount is locked for the entire term with no option withdraw in case of an emergency. However, child plans are flexible, and one need not always wait until the end of the plan to avail of the payout. Although child plans do have a lock-in period, normally around 5 years for ULIPs and 3 years for traditional plans, certain policies like ULIP based insurance plans allow you to make a partial withdrawal, up to a certain percentage of the fund value, after the completion of the said term. Additionally, traditional child insurance plans are designed to facilitate pay-outsat pre-determined intervals corresponding to certain major events in the child’s life. Further, if were to happen, before the completion of the policy period, the insurance company will terminate the policy and pay the funds to the child.

There are a lot of reasons, one can consider while investing in child insurance plans for a secure future.

Funding Child’s education

A major chunk of the parent’s savings goes into paying for the child’s education. This could be afforded by buying a child investment plan as the sum obtained on the maturity of the plan would help lessen this financial burden.

Protection against illness

In case there is a family history of critical illness, it is advisable to purchase children insurance when he/she is young and fit. In case of any uncertainty, a child plan offers huge financial support.

Collateral of loans

A child insurance plan is also widely accepted by all banks as collateral if one wants to take an education loan or personal loan for a child. This will greatly help the son or daughter when he or she requires a lump sum for higher studies.

Protection against uncertainty

In case of your untimely demise, the insurer offers a waiver on the premium on a child insurance plan and the beneficiary (your child) receives a lump sum and is no longer required to make the premium payments.

Habit of saving

Before buying a childcare plan, one should go back to the financial plan and calculate the need for funds during the various stages of life. Take inflations into account and buy a suitable child insurance policy. While initially, it may seem like a burden, paying periodical premiums will soon become a habit that will put in good stead when the ward grows up.

Building a healthy savings fund towards your child’s education is advisable A child insurance plan helps one save the desired sum for the kid’s future financial requirements, hedging all uncertainties. It doesn’t really matter how much you start with; the key is to start saving as early as possible so that you can ensure your returns will be better in the long-term. At the end of the day, having a good plan in place today is better than a perfect plan tomorrow.

Anjali Malhotra is Chief Customer, Marketing, Digital and IT Officer at Aviva India