Child life insurance policy

                                        

Marriage is bounded by love and every one will agree that kids are the proof of love. Getting a kid is a different feeling altogether where every father and mother wish to do everything to groom the kid and in every possible way to make it happy to see the world which is beautiful. Everybody is dependent on their parent until we start earning on our own. Indian’s differ from the west in this aspect of grooming their kid until they stand on their own. So the need for money to grow the kid from child to a man or woman is very much needed in our country. Now you can see the need for money and the reasons to choose or not choose these child insurance policies.

Child Insurance Policy

Most of the child insurance policy insures the life assured; the person who takes the policy for the child and the child itself. The minimum entry age is from 0 years and restricted mostly from 13 in all the insurance companies. The premium paying term may be for 7 years or more depending on the policy chosen. For selling the policies the most effective tool chosen is that the premium can be shown for tax rebate and it is for your kid. If someone says won’t you protect your child’s future with this beautiful policy, it will surely touch your emotion and you will give up your resistance in taking this policy. Have you analyzed the pros and cons in choosing this policy? A PPF account in the name of a kid and invested for 15 years will earn more than these policies.

Different case studies

Consider this example, Engineering at present may cost you 7, 00,000 and after 15 years including Inflation @ 7% the amount required may be 1655419 after adjusting for tax. For accumulating this amount you need to pay 6254 monthly. If you pay the same amount every month by opening a PPF account in the name of a kid it may generate 22.5 Lakhs more than what you get in your child insurance policy.

Monthly in PPF	No of years	Total Amt paid	Amt @ Maturity
6254	15	1125720	2253621

As future costs of education is bound to increase and if the child chooses different stream which may requires more money PPF may be the good option among these two examples. If the sole intention of these policies is to have some amount accumulated for your kid, then you can open Recurring deposits and Fixed deposits which will generate more returns.

Monthly in MF	No of years	Total Amt paid	Amt @ Maturity @ 12%
6254	15	1125720	2952000

Consider investing the same amount in mutual fund which has returns only at 12%, you will end up accumulating around 30Lakhs. Now which one will you choose among the three?