On a baby’s first birthday, his father gifted him an insurance policy. On seeing this, the mother said that it was a waste of money, as the baby had neither debts nor liabilities. On the face of it, this sounds like a valid argument. However, her confusion prompted a series of Questions& Answers as follows:
M: Why invest in a Child Plan?
F: In this plan, I am the insured person while our son is the beneficiary. The idea here is to safeguard his future in case something happens to me. In addition, it also helps us save for his higher studies/marriage, etc.
It is better to start early so that we can take advantage of compounding. Don’t see it as an insurance taken to pay off liabilities but as a plan to safeguard our baby’s castle of dreams.
M: So is it an insurance plan or an investment plan?
F: There are different types of insurance plans, with and without investment.This child policy comes with a ‘life cover’ as well as a ‘sum assured at maturity’. We have the flexibility to choose the tenure as well. And yes, we get immediate tax benefits up to a certain limit.
M: How will the premiums be paid if something happens to us?
F: Don’t worry. I have opted for the waiver of premium rider, which means that if I am no longer there, the future premiums will be waived off and paid by the insurance company. Hence, the policy will continue and on maturity, a lump sum amount will be paid to our son.
M: All this makes sense but why the urgency? Can’t we spend the money now and buy a plan later?
F: Let’s face it, life is unpredictable. You never know what will happen to us tomorrow. Road accidents, air accidents, terminal medical conditions, lifestyle diseases... all this is very scary and there are many what-ifs. We need to be wise and protect our child’s future, even if we are not around. And, of course we are looking only at the worst case scenario. In all probability, we will be healthy and this money will grow into a handsome lump sum amount for all of us to utilize. I think this will be our greatest gift for him.
The explanation greatly satisfied the mother. She was happy with her husband’s decision to invest in a Child Plan, as this would secure their baby’s future.
To read more about Child Plans, click here.
Have you ever wondered why you are asked to pay lesser premium than your friend or family member? To end the confusion, we have prepared a list of factors that affect how life insurance premium is calculated.
Awareness is the first step towards making effective decisions. Appreciating all the nuances of a powerful financial product like a ULIP will help you to decide the perfect plan for you.
The scope of an insurance policy is sometimes not sufficient to ensure your family’s financial security. However, you can fortify your insurance plan by buying an additional cover for extraordinary circumstances. These add-ons are called riders.
Loan against insurance policies is a good option in case funds are required in an emergency situation and can be a better alternative to a personal loan or a credit card loan or asking friends/relatives for financial help. But are they always a good idea?
In case of whole life insurance, policy benefits are not restricted to a fixed term & extend to the entire lifetime of the policyholder.