5 Common Mistakes To Avoid While Buying A Child Plan

Hello and welcome to Fundoomoney, your 24X7 buddy for all your money matters! Life insurance companies offer child plans to help save for the future expenses of children, especially higher education. A variant of the child plans is children’s unit linked insurance plans (Ulips). They use your premiums to provide life insurance coverage and help you buy units in a fund of your choice. A major attraction of Ulips is that they help you invest in equities and benefit from its growth during the long Ulip term.
Now, to make the most of child Ulips, you need to buy them with care. Unfortunately, many people make some common mistakes that prevent them from doing so. Here, we will warn you about these common mistakes. So, stay tuned.

Inadequate life insurance
You need to ensure that you have enough life insurance to secure your child’s future even in your absence. The financial advisor or your financial planner needs to help you arrive at the life insurance coverage you need and you need to buy the child plan accordingly. You can also get an idea of this yourself by using a life insurance calculator from an established website.

Incorrect policy term 
Make sure that the tenure of the plan matches the actual need. If you will need the money for your child’s higher studies 15 years from now, a child Ulip with a 20 year term is inappropriate.

Earmarking one child plan for two children
You need to make separate provisions for each child. This will also prevent you from overdrawing from your common savings pool for the elder child just in case your savings fall short. Often, such moves make the future of the your younger child vulnerable.

Absence of premium waiver rider
In this channel, we have a separate discussion on the importance of premium waiver feature in a child plan. Do go through it. Many people buy an insurance plan for their children’s future without ensuring that they have this feature. Premium waiver feature makes sure that the policy continues even in your absence and your child gets the money at the time of need.

Ignoring additional benefits
In your absence, your child may need regular financial support for which entire sum assured received, may get spent. Many child plans offer the facility of financial support with premium waiver option in which the insurance company pays the premium on your behalf. Ensure that you have this feature is in your child plan and don’t miss out, as many people do.

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