Life insurance is crucial to secure a child’s future. It can help pay for future education expenses and provide financial protection in case of an unfortunate event.
In this article, we will explain how life insurance can be beneficial for your child’s future.
One of the most important factors to secure a child’s future is education. Education allows a child to pursue his/her goals. Thus, every parent desire to provide their child with the education they want. However, as education costs are rising substantially, accumulating funds for it can be very difficult. But parents can opt for life insurance to get financial help to pay future education expenses.
Life insurance can help parents generate funds for their child’s education. Also, as it offers life cover, it can offer a sum assured in case of an unfortunate event. If the parent passes away when the policy is active, then the insurer can provide his/her nominees with a sum assured. Hence, it will become easy for the child to pay for the education expenses.
How Life Insurance can Help in Protecting a Child’s Education
- It Provides Life Cover
One of the most important benefits of child education insurance is life cover. This benefit can provide financial protection to the dependants of the policyholder in case of his/her untimely demise. Therefore, life insurance can ensure a child gets the education he/she wants.
- Different Life Insurance Plans
There are different types of life insurance that parents can choose based on their requirements. Primarily, parents can opt between ULIPs and endowment plans.
A unit-linked insurance plan (ULIP) provides the benefits of life cover as well as investment. A part of the premium is invested towards life cover. The remaining amount is invested in investments like equity and debt funds. Therefore, ULIPs can provide financial protection and allow parents to build a significant corpus.
As child endowment policies are a type of savings plan, these policies can offer fixed returns. Parents can choose a plan based on their risk appetite.
- Payout Options
Generally, these plans offer two types of payout options- lump sum and regular. In case of regular payout, the payment is provided on a regular basis. However, lump sum payout provides the funds in one payment.
Regular payouts can be used to pay for periodical expenses, like fees, etc. Lump sum payout can be helpful for huge expenses like higher education.
Things to Keep in Mind When Selecting a Life Insurance Plan
- Identify the Future Requirements
The first step that parents should take is understanding what education their child might want to pursue. Based on the requirements, it can become easy for parents to know the amount of funds they will require in future to pay for the education.
- Start Investing Early
In order to build a substantial corpus, parents need to start investing early. This will provide them with more years to accumulate the funds they require.
- Opt for the Right Sum Assured
Selecting the right sum assured is crucial for ensuring a child’s future. If the sum assured is low, then the child might not have the funds to pay for the education. Hence, it can lead to a financial burden. Therefore, by opting for the right sum assured, parents can offer their child the required financial security.