Becoming parents is a joyous occasion as you bring a new life into the world and start your own family. As joyful as parenthood might be, it also brings in its wake various financial responsibilities. You become responsible for providing the best possible upbringing and education for your child. Moreover, you need to create funds for your child's higher education and marriage too. All these goals need sufficient funds, and so you need to start saving for your child's future.
While you can make effective financial plans to create sufficient funds for your child, an unexpected contingency might blow your plans apart. In case of your premature demise, your well-laid plans would go awry, and your child's future might be threatened. That is why you need to create a secure financial corpus for your child's future, and this is where life insurance comes into the picture.
As new parents, life insurance policies are ideal if you want to secure your child's financial future. Suitable plans of life insurance for young parents cover the risk of premature death and pay a financial corpus so that your absence does not affect your child's future. Do you know which plans are suitable life insurance for young parents?
Life Insurance Plans For New Parents
There are two types of policies that are the best life insurance for new parents. They are as follows –
Term insurance plans
Term insurance plans are pure protection plans. You choose the sum assured, and the coverage duration and the policy promise to pay a benefit in case of your premature death. Term plans have very low premiums, which allow you to opt for a high sum assured. As such, you can choose an optimal coverage level that would provide sufficient funds to your family so that your child's future does not suffer. Here's how you can use term insurance plans to secure your child's future –
Choose a sum assured, which is at least 10 to 12 times your annual income. Also, try and increase the sum assured later on in life. If you have a high sum assured, your family would receive a lump sum benefit from the policy in case of premature death. This benefit would allow your child to get the best education without worrying about the inherent costs.
Nowadays, term plans come with a whole life coverage option. Choose this option to secure coverage till 99 or 100 years of age. This option would, more or less, guarantee a benefit and would ensure that your child has sufficient funds, when needed, to fulfill his/her dreams. If you don't get the whole life option, opt for the maximum possible coverage duration for being covered for a longer time.
Choose the available riders for a more inclusive scope of coverage.
Child insurance plans
If you need a specific plan designed for securing your child's future, you cannot go wrong with a child insurance plan. A child's insurance plan provides coverage on the life of the child or the life of the parent. In both cases, the parent is the policyholder who pays the premium. Child insurance plans have an inbuilt premium waiver benefit. This benefit waives off the premium is the parent, who is the policyholder dies. Even after the death of the parent, the policy does not stop. The insurance company pays the premiums, and the policy continues till the chosen policy tenure. When the term comes to an end, the plan pays a maturity benefit, which can be used for the child's higher education or marriage. Thus, by investing in a child insurance policy, you earmark a corpus for your child, which is not disturbed even when you are not around.
When choosing child insurance plans, here are some points to consider –
Child plans are also available as unit-linked plans. Choose ULIPs to earn attractive, market-linked and inflation-adjusted returns which create a substantial corpus for your child's needs.
Choose a tenure which coincides with the time the child would need funds. For instance, if you are new parents, the policy should have a term of 18-25 years, depending on when your child would need money. If you think your child would need money at 18 years for higher education, choose a term of 18 years and so on.
Opt for a sufficient sum assured so that the corpus fulfills the requirement of your child.
Term insurance plans and child insurance plans are, therefore, the best life insurance for new parents. Ideally, you should opt for both these policies so that you don't have to worry about your child's and your family's financial future if you are not around. A term plan would help replace your income, while a child plan would create an assured corpus for your child. So, as new parents life insurance should feature in your financial portfolio, you can choose the plans above to fulfill the need for child planning.