I am 47 years old married with a son and residing in Hassan .My son is 15 years old and has just completed his SSLC. A friend has recommended that I avail a traditional child life insurance plan for him to take care of his expenses. Will this plan pay money needed for my son's college education? Please advise.
A child life insurance plan is an investment plan that pays a benefit that is linked to milestones in your child’s life. Its purpose is to build/accumulate a corpus for a child's future needs. Marriage and a college education are the main reasons to invest in a child life insurance plan. These plans generally have an inbuilt waiver of premium rider that keeps the insurance active for the child even after you die.Your decision to buy a child plan should be based on the objective for which you are planning to save. You should have a 8-12-year investment horizon while buying a child life insurance plan. This ensures that your investment has time to grow in sufficient size to match the amounts needed for the financial goal (College education of child/marriage). A child life insurance plans serves no purpose as your child is already 15 years. 1. You must buy a term life insurance on your own life. When something untoward happens to you, there will be a sum assured paid that will take care of your child’s main expenses over the years. 2. You should look at bank fixed deposits or liquid mutual funds to achieve short term goals. 3. Do note that in traditional child plans, the effective returns are 2-5% of premiums paid.