Hyderabad: Every parent pays a lot to secure their children's future. Child insurance plays a critical role in this aspect as it comes with the twin benefits of insurance and investment. If chosen wisely, these child covers will help in generating sufficient corpus overtime that will take care of the pre and post educational financial needs of children.
Education inflation is rising day by day in proportion to the rising aspirations of children. Make plans to provide financial security right from the birth of a child to cover educational and other costs for the next 21 years or so. What is the current cost in leading educational institutions? Estimate how much it will increase after 15 years. Then a proportionate amount should be invested.
Our investments should yield high returns. This will be possible with equity mutual funds, fixed deposits and insurance policies. Parents are sending their children for higher education to any part of the world. They should be prepared for these future expenses. Investments should be made in income-generating plans.
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Investments need to be sustained over long periods of time to create income sources. The PPFs (Public Provident Funds), mutual funds, shares, gold, real estate, etc are good investments. Child insurance meets any eventuality of the earning member no longer available for the family. Children's policies continue even after the death of the insured as companies waive premium. A stipulation allows compensation to be used only for higher education and other expenses of children.
Another unique feature of child insurance policies is compensation is given twice. The nominee is given immediate compensation in case anything happens to the policyholder. After that the insurance company pays the premiums till the term is over. After that it will once again pay the policy value to the nominee upon maturity. The periods are decided according to the expenses of higher studies, their marriage etc.
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Endowment plans and unit linked insurance policies (ULIPs) are also preferred. Those who want to take less risk can consider endowment policies. They provide bonuses and loyalty additions. The return can be up to 6 percent. The ULIP investments are mostly in equities, which can be chosen when children are expected to need the money only after another ten years.
Experts suggest life insurance of 10-12 times the annual income. They recommend term policies. Just taking an insurance policy is of no use. Provides financial protection only in unforeseen circumstances. Definitely 15-20 percent of your income should be invested for the future needs of the children. Term policies and mutual funds should be taken jointly to ensure financial security.
