BackDoes your child need life insurance?
Child Insurance is the worst investment a parent can make for their children. In fact, it is the parents who should get more life insurance coverage once the child is born
PremiumBuying life insurance for children is not uncommon. But, is that even practical?
Dilshad Billimoria, certified financial, Director, Dilzer Consultants, said, child Insurance is the worst investment a parent can make for their children.
The objective of Insurance is for protection and income replacement when the main income-earning member dies. Hence, it is an essential requirement for every earning individual. Since your child does not have any income it is a futile expense.
"By Insuring a child- (education plans and child insurance plans) what is the point?! Should anything happen to the child- parents will receive the monies- What is the end objective in that? Not a good option at all!" Billimoria adds.
Then why do people buy life insurance for children?
Most parents buy a child policy assuming that it would be a great investment for their future goals like higher education or marriage. However, you can't be more wrong about this. Let's do the math to understand it better.
Life insurance policies with a return benefit provide an interest rate of 3 to 4%. Now, if you buy a child policy for 15 years for an annual premium of ₹24,000, then at the end of the tenure you will get ₹4 lakh.
Meanwhile, if you invest the same amount in an investment product that gives you a 7% return, then at the end of 15 years you will get a corpus of ₹6.5 lakh.
It is important to understand that insurance and investments are two different things with two different objectives. Mixing them does not solve any purpose.
Adding to what Bilimoria said, Shweta Jain, certified financial planner, founder, Investography, and author, My Conversations with Money, expressed, in fact, it is the parents who should get a good life insurance coverage once the child is born so that in case anything were to happen to the parent, the child's goals are protected.
However, when it comes to health insurance, Jain pointed out, "Your child definitely needs to be included in your health insurance policy. Your child can fall sick and might need hospitalization."
Even in the case of accidents, this is necessary. It is essential to ensure that all family members are covered adequately, Jain concludes.
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