Generally, Insurance agents mis-sells child insurance plans claiming that you are preserving your child’s future by taking Insurance! But it is a mis-conception!
Life insurance should be taken on the name of the bread-winner in order to protect their child in the event of his demise. The concept of Life insurance is to provide financial assurance in the event of his death.
But insurance agents claims that you are saving for your child’s future. Being “Emotionally connected” many people prefer to take child insurance policies.
Child Insurance Policies are generally “Endowment Policies” which offers less sum assured with higher premium. Besides this, there is no meaning on taking insurance in the name of your child! With the “Child insurance plans” the sum assured will be paid back if your child demise . But it is of no use, because “Your child is financially dependent on you, You are not dependent on him”
There are some child insurance policies which covers parents risk cover. If the parent demise; the sum assured will be paid back to child. But this policies are very rare!
Besides this, child insurance policies falls under Endowment Plans. The sum assured is very less and it doesn’t meet your child’s future needs, if you take this child plans by connecting “Emotionally”.
Higher Premiums and less risk cover are the part of this policies. If you are looking to protect your child future, take “Term Insurance” ; which offers higher risk cover with less premium on your name.
Invest the remaining corpus partially in fixed income instruments like PPF and Sukanya Samriddhi Yojana(if you have girl child)and some portion of your income into equities for long term goals.
It is up to your risk appetite to decide on allocation towards equity and fixed income instruments. But do remember to take Insurance on your Name first to protect your child’s future.
Remember- “Insurance First; Investments comes Next“. Protect your child’s future by taking insurance on your name rather than taking child insurance plans and then think of investments!