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When Does Child Life Insurance Make Sense?

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When Does Child Life Insurance Make Sense?
August 03, 2023

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Growing your family and welcoming a child is a joyous occasion. You want to spend every possible moment looking after your little ones and taking care of them to the best of your ability. While looking at ways to protect your child’s future, you may learn about child life insurance. Many people deem it necessary, while others do not always agree. When it comes to your child, only you can decide what’s right and what’s not. To help you make an informed decision, let’s take a look at everything you need to know about insurance for children.

What Is Child Life Insurance?

As the name suggests, child life insurance is a policy that provides your little one with a whole-life cover. You pay an affordable annual premium to insure your child’s life. Additionally, the insurance plan helps build up funds for your child’s future.

What Are the Benefits of Insurance for Children?

If you’re wondering why a child life insurance plan might be a good idea, here are the benefits:

1. Guaranteed Insurability in the Future

We always hear how important it is to purchase life and health insurance when we’re younger. There are two reasons for this. Firstly, when you’re young, you likely do not have any major health issues that disqualify you from getting the health cover. On top of this, when you’re healthy and young, your premiums work out to be significantly lower. People use similar logic when purchasing child life insurance. By getting a whole-life policy when the child is young, they ensure that their little one has cover for the rest of their life.

2. Locks In Better Insurance Rates

The premiums you pay for a child life insurance plan are generally very affordable. You can opt for a high sum insured amount and still end up with a pocket-friendly premium. The premium amount remains static, so your child will not necessarily have to pay a higher premium once they’re older. When you purchase a policy when your child is young, you secure the premium rates for them.

3. Investment Opportunities

The premiums you pay for the upkeep of a life insurance policy get invested on your behalf by the insurance provider. When the policy matures, you receive the cash value of those investments. Purchasing a child life insurance could help you grow some money for your child’s future. But, you must remember that these investments take time and will not show great returns immediately.

Disadvantages of Child Life Insurance

While there are some benefits, these policies also come with drawbacks:

  • Slow Growth

    The money you pour into the insurance policy takes a while to grow and show returns. If you want to secure your child’s financial future, you should consider other investment opportunities instead.

  • Guaranteed Cover Could Depreciate Over Time

    Let’s assume you purchase a whole life insurance policy for your child today. You’ve selected a cover amount that may seem like a lot of money. Over time, as inflation increases, the actual value of the cover will decrease significantly. So, if something happens to your child in a few years, their nominee will receive the entire sum insured, but it might not be enough.

When Does Child Life InsuranceMake Sense?

Insurance for children only makes sense in two instances. First, if you have a family history of genetic health troubles, purchasing insurance as early as possible makes sense. Your child is still young and healthy. So, they cannot get disqualified from getting a policy. Secondly, you could end up in a scenario where your children help support you. Whenever children look after their family members, they must purchase child life insurance.

When Does Insurance for ChildrenNot Make Sense?

Most often, it doesn’t make sense for parents to purchase a child life insurance plan. There are many other investment and insurance policies you can use to safeguard your child’s future plans.

Frequently Asked Questions About Insurance for Children

Q: How much coverage should I get?

A: This depends on your financial status and the insurance provider you select. Some insurers put a cap on the maximum sum insured amount they offer. A higher sum insured could mean higher premiums. So, you must consider your finances before you make a decision.

Q: Does the child life insuranceplan require a medical check-up?

A: In most cases, no, your child will not have to undergo a medical check-up before the insurance application gets approved.

Q: How much does insurance for childrencost?

A: The policy cost depends on the sum insured amount and the insurer’s rates. While most plans are affordable, others can put a dent in your savings.

Alternatives to Child Life Insurance

Not everybody wants to purchase insurance for their children. Instead, they might add their kids to their existing health and life insurance policies. If you’d like to safeguard their future financially, you can look at investing in child plans for them. These plans will help you invest and grow your money to fund your child’s dreams.

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Francis Rodrigues Francis Rodrigues

Francis Rodrigues has a decade long experience in the insurance sector, and as SVP, E-Commerce and Digital Marketing, HDFC Life, manages the online sales channel, as well as digital and performance marketing. He has had hands-on experience in setting up sales channels and functional teams from scratch over a career spanning 2 decades.

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Vishal Subharwal Vishal Subharwal

Vishal Subharwal heads the Strategy, Marketing, E-Commerce, Digital Business & Sustainability initiatives at HDFC Life. He is responsible for crafting and ensuring successful implementation of the overall organisation strategy.

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