Investing to secure your child’s future: Insurance policies on child education
Every parent seeks a secure future for his child. And, a secure future primarily depends on what kind of support the child gets during the key milestones of his life – education, career and marriage. Among all these three milestones, ensuring the best education for their child features at the top in the ‘must-do for our child’ list of most Indian parents.
Dreams v/s Reality
Majority of parents in India want their children to study till the postgraduate level, however, a report on Times of India* published on Jan 5, 2014 suggests that only 10% of students in India among the university-age population have access to higher education. Most parents in India are worried about building a corpus for education, given the mounting rate of inflation.
The cost of education is growing at 10-12% annually in India according to a report on Economic Times India^ published on Jan 19, 2015. In fact, a recent ASSOCHAM survey** on “Rising school expenses irks parents” shows that private school fee is up by 150% in the last 10 years and over 70% of parents spend 30 – 40% of take-home pay on their children’s education. Now, if we were to append the risk of life’s uncertainty (untimely death or disability of the earning parent) to the cost of education, nothing could be more distressing for parents.
Why an insurance policy for child education?
In order to ensure that your child’s big dreams are not compromised for any reason, it would be a good idea to consider taking an insurance policy for child education Now, you may ask, how an insurance policy for child education is different from a regular term plan or other Unit Linked Insurance Plans (ULIPs) in the market. Well, both regular term and other ULIPs consider child only as a beneficiary or a nominee. That is, the child will get the maturity amount on the death of the parent and the policy will expire.
Whereas, an insurance plan for child education offers dual benefits:
- It protects your child against unfortunate event of your death with a Death benefit
- It continues to offer payouts in the milestone years of your child’s life till the maturity of the policy even after you are no more and at the end of the term, the child gets the Maturity Benefit
A few plans also give the facility of waiver premium. For instance, the ICICI Pru SmartKid (using Smart Life) Solution where you purchase a policy with parent as life assured and child as nominee solution not only offers the lump sum amount to the child after the parent’s demise, but also waives off the remaining premiums without discontinuing the policy.
An insurance plan for child education gives you the flexibility to invest in small amounts every year without creating an aggregate financial burden on you. So that, when your child is ready to go to a reputed college or pursue higher studies abroad, you have a corpus fund for his education ready.
When to invest?
Usually, you start planning for your child’s education when he is around 2-3 years old and the earlier you invest, the better it is. You would be able to spread your financial risk allocation and build a substantial corpus (considering the power of compounding) over a span of around 10-15 years.
How to choose?
Before investing in any insurance policy for child education, you should bear the following factors in mind.
- Determine the amount of money you would need for your child’s education, right from his schooling years to post graduation / higher studies. You would also need to factor in the inflation rate.
- Study whether the features of the plan meet your child’s educational requirements.
- Decide if the premium is within your budget.
Life has both pleasant and unpleasant surprises in store for your child. An investment in a good insurance policy for child education will take care of at least the unpleasant ones during his growing years and secure his future.
Read More about Child Insurance:
Unlike traditional products, Unit linked insurance products are subject to market risk, which affect the Net Asset Values and the customer shall be responsible for his/her decision. The names of the Company, Product names or fund options do not indicate their quality or future guidance on returns. Funds do not offer guaranteed or assured returns. For more details on the risk factors, terms and conditions, please read the sales brochure carefully before concluding a sale. L/II/1232/2015-16