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Do Children Need Life insurance?

The objective of life insurance is simple – you buy the plan and pay the premium. In return for this, the life insurance company offers to pay your nominees a sum assured when you die. If you outlive the policy period, you stand to receive a maturity benefit. But if you die, the proceeds from the policy act as an income replacement. This is why it is common and logical for the main breadwinner of the family to have life insurance cover. But these days, it has become common for people to buy life insurance covers for family members who do not contribute financially to the family. This includes the children too. A life insurance plan for a child is not the best investment. Read on to know more.

What is a life insurance plan for a child?

As the name suggests, a life insurance plan for a child covers the life of a child. It is an endowment plan where their parents receive a death benefit if the child dies during the policy period. If he or she outlives the policy period, a maturity benefit is paid out.

The main reason why parents buy such plans is to receive the maturity benefit after investing in the plan regularly. But this is a very bad idea! Financial experts strongly believe that getting a life cover for your child is a waste. If you really wish to invest for your kid’s future, invest in other, effective investment plans rather than the endowment insurance plans as the returns are much lower.

Is life insurance for kids required?

In a word, no. A child doesn’t require life insurance cover. Buying a life insurance policy for a child has practically no benefits. Rather, the plan becomes a liability for you. Here are some reasons why:

1. The child isn’t earning

As stated, the main purpose of life insurance is to provide an income replacement. If the child is not earning then why get his or her life insured? This is a very illogical thing to do! Rather than paying the premium on the life insurance plan for a child, it would make more sense to pay a premium on a health cover. Or, you could also use the money to ensure your life for the benefit of your child. If anything happens to you, he or she will receive the sum assured and the money can help pay for the child’s future education costs, etc.

2. The lifetime risk is extremely low

The chances of a small child dying are extremely low. And since life insurance is mainly a life cover that is received after the policyholder’s death, this is another reason that proves a life insurance plan for a child is pointless.

3. The investment is not fruitful

The investment does not fetch high returns. Your money stays locked in for a long period of time without earning enough dividends. If you really wish to build up a corpus for your child’s future, go for better investment options that would actually help you build up a huge corpus for your child’s future.

Many people invest in such insurance plans without understanding the scope of the cover. They mix it up with the child plans where the parents are the insured people and the children are the beneficiaries. A life insurance plan for a child is not the same as a child’s plan. If you wish to make an investment for the benefit of your son or daughter, make sure you do your research and understand what type of cover you are choosing.

Focus on health insurance

Rather than getting a life insurance plan for your child, focus on getting a very good health insurance cover for him or her instead. Health is wealth and while growing up, your kids should never have to remain ill for the lack of good treatment. Here are some reasons why health insurance for children is such a crucial requirement:

1. To keep them healthy

The biggest duty you have as parents is to keep your kids healthy and fit. You should do everything in your power to ensure they stay safe and away from dangers. This is why you need to be very careful about their health and wellness. Regular check-ups with the doctors, dentists, etc are the need of the hour. Getting a good health insurance plan makes it easy for you to pay the health care bills and not worry about anything when you need to get your kids medically evaluated.

2. To afford the best treatment

If in a bad situation your kids end up injured or ill, they may require hospitalization. Hospital charges are very high these days so you should ensure you are able to afford the best hospitals at such times, having the backup of a health insurance policy makes it very smooth and simple. Also, the health insurance plans can help with pre and post-hospital care, ambulance charges, diagnostic charges, and other expenses related to your child’s treatment. With the health plan in place, you can easily make the best possible treatment accessible for your kids. This in turn will help them to recover in a quick and effective manner.

These are the two main reasons why the importance of health insurance is so pronounced for kids. Go online, compare the plans and then choose the best possible health insurance for kids and keep your precious children secured.

Conclusion

There are some very good investments you can make to benefit your child. SIP mutual funds are an excellent option. Then, you can also look at fixed deposits and ULIPs to help build up a corpus for your child’s future. There are some very good options available. First, ensure the health of your child is protected with one of the best health insurance policies. Then, invest wisely for their future. And lastly, stay away from the insurance plans that promise to cover the life of your child because they are quite redundant.

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