6 common myths about child insurance plans
Child insurance plans are life insurance plans which are designed for creating a secured financial corpus for your child. The plan has an inbuilt premium waiver benefit wherein the future premiums stop if the parent dies during the policy tenure. Thus, the plan creates a secured corpus with or without the parent’s contribution and is an ideal financial tool for your child’s future.
Beneficial as the plan might be, there are a lot of myths attached to it. Most of us don’t understand the finer details of child plans and develop preconceived notions. These myths prevent you from buying a child plan. Here are some common and popular child plan myths vis-à-vis the realty –
Only the child is covered under the plan
Many of you believe that child insurance plans cover only the child. This is wrong. There are two types of child insurance plans, one which cover the child and the other which cover the parent. Usually, you would find most child plans to cover the life of the parent. In case of the parent’s demise, the premium waiver rider is triggered and the plan continues till maturity. So, when buying a child plan, find out whether the plan covers the child or the parent.
The policy ends if the parent dies
No it doesn’t. That is the beauty of a child insurance plan. The plan has the premium waiver rider inbuilt in its coverage features. If the parent predeceases the child, the rider becomes effective. If the parent was covered under the plan, the death benefit is paid immediately on death of the parent. Thereafter, the plan continues. Future premiums are paid by the insurance company till the time the plan matures. On maturity, the promised maturity benefit is paid again irrespective of the death benefit already paid. Thus, death of the parent doesn’t affect the continuity of the child plan. The plan runs for the chosen tenure by virtue of the premium waiver rider creating a secured fund for the child’s future.
The policy is suitable only for meeting the child’s education costs
A child insurance plan doesn’t levy any restriction on the usage of the plan’s benefits. When the plan benefits are paid, they are not supposed to be only for the child’s future education. You can use the benefit as you please. It is only recommended and deemed by the insurance company that the plan benefits would be used for the child’s higher education. You are free to use it any other way you like.
The policy might not be sufficient to meet inflated costs in future
This is a debate which many of you have against child insurance plans. Well, you are wrong. Child insurance plans are also offered as unit linked insurance plans (ULIPs). If you buy a child ULIP, the premiums you pay would be invested in the capital market. Thereafter, your investments would grow according to the growth in the capital market. As you know, capital market growths are inflation-adjusted. Therefore, child ULIPs provide a sufficient corpus for meeting inflated costs in the future.
The terms and conditions of the policy are difficult
Only people with limited understanding of insurance believe in this myth. Since some concepts of life insurance plans are technical, many believe that the terms and conditions of a child plan are also difficult to understand. They can’t be more wrong. Child plans are simple. You just have to understand who is covered under the plan (parent or child), the benefits promised, the tenure and the premium you have to pay. Moreover, you must be a parent to become eligible to buy the plan. The rest is easy. The plan would continue for the chosen tenure promising a maturity benefit even if the death benefit is paid.
The policy locks in the investment for a long period
Insurance plans come with a long-term perspective and so many of you believe in this myth. But this is a not entirely true. If you buy a traditional child plan, you get the option of availing policy loans after the first two or three years. This loan facility gives you access to your funds when required. In case of child ULIPs, partial withdrawals are available. You can withdraw from your fund value, partially, after the first five policy years. Thus, child plans allow liquidity. Even if your investments are locked for a long period, the plan promises a corpus for your child’s future. Isn’t creating a secured corpus for your child a long-term effort?
Here are more life insurance myths for you to bust
If you believe in any of these myths, it’s time to see the reality. Child plans are the only tools which promise a secured future of your child even in case of your early death. So, understand the benefits of a child plan and buy one if you are parent.
Read more about Why are child insurance plans ideal for your child.
Read more about Ask these things to yourself if you are considering of not buying life insurance.
Visit our site https://www.turtlemint.com/life-insurance to find the right child insurance plan.