Life Insurance – Are you protecting your children enough?
As parents, we are very protective about our children and want to secure their future. With this intention, a lot of us buy life insurance for our children. There are many life insurance products available in the market for children. However, the question that comes up very often is, ‘what is the best product for my child?’ The answer depends on, what exactly you want to provide for your child?
There are many products available in the market that are branded as child products. Also, there are many other products available with age at entry less than 18, which means allowing children below age 18 to buy the product. But they are not exclusively meant for children. If a parent is buying one such policy for his/her child, it is only with the objective of providing some savings in the name of the child. It doesn’t give any benefit in case of parents’ death and the future premiums will have to be paid as committed in the policy.
But if the objective is to protect the child’s future expenses related to education and other requirements in case of unfortunate death of the parent, a product with waiver of premium benefit would be ideal. Mostly, a product branded as child product will have waiver of premium as an inbuilt benefit in the product. So, in the unfortunate event of parent’s death, future premiums need not be paid and all future benefits promised under the policy will be paid to the child as per the schedule. This will secure the future expenses of the child and hence meets the objective. The next question would be, on whose name the policy should be bought? In the name of the child or in the name of the parent? There are few products where the life insured is child and the premium waiver benefit is in the name of parent. And there are few other products where the life insured is parent, the premium waiver benefit is also for the parent and the beneficiary is the child. If the life insured is child, in case of parent’s death, only future premiums are waived. No death benefit will be paid immediately. This is because the child is the life insured and hence death benefit is payable on child’s death. But in case the parent is the life insured, in addition to the waiver of future premiums, the death benefit is immediately paid to the child in case of parent’s death. This benefit will come in handy when the family is in distress. And all the future benefits, i.e. maturity benefits and bonuses are all intact and will be paid as per the benefit structure of the product. Depending on the requirement, whether some immediate benefit is required or not in case of parent’s death, a suitable product can be chosen.
While buying a life insurance product for your child, it is important to be clear on what exactly you want to provide to your child. And it is far more important to understand the benefits offered by the product you want to buy. Only then can you buy a suitable product for your child and have the satisfaction of protecting your child’s future.