As young parents, there is nothing more joyous than holding your newborn in your hands. Doting parents take the vow to protect their bundle of joy from harm. Offering financial protection, too, needs to be part of this vow, and it needs to be given careful consideration.
Many parents opt for a child insurance plan to cater to the financial needs of their child’s future but overlook their own insurance needs. The core purpose of opting for life insurance is to ensure that your family and dependents are financially secure if you were not around.
The higher the number of dependents you have, the higher should be your life insurance pay-out in order to take care of them. As a young family seeking life insurance, here are some tips to help you attain the appropriate life insurance cover for your needs.
Opt for child life insurance plan
As parents, the best gift you can give your child is a financial security for the future. Investing in an apt child insurance plan will ensure you can save money for your child’s future needs like higher education and marriage. Considering the uncertainty of life and the rising cost of education, investing in child insurance ensures your child has a protective financial cushion even if you are not around.
Consider opting for a joint cover as a couple
If you are a working couple, you could consider opting for a joint insurance plan. A joint life insurance pays out on the death of either of the two insured lives. Some joint insurance plans also offer regular income to a specified surviving family member. As a working couple, if both you and your spouse are contributing for the financial future of the family, the demise of any one
of you can have dire financial consequences. The joint insurance plans are also marginally cheaper than buying individual insurance plans for a couple.
Check for the right to split
Before going ahead with a joint life insurance plan, ensure your plan has a “right to split” clause. Joint policies get complicated in matters of divorce or separation. If the full premium dues from both partners are not paid, the policy will lapse. But if your policy provides the right to split, the policy may be continued in an individual capacity, and this would be better for securing the future of any dependents such as children.
Choose the sum assured carefully
With a child, your financial responsibilities as a parent increase exponentially. This is a good reason for you to ensure you have an adequate sum assured from your life insurance plans. A good yardstick is to ensure that your life insurance cover is between 10 to 20 times your current annual income. Ideally, the sum assured for your life insurance plan must be that amount which can cover all the regular and irregular expenses of your dependents for the long-term.
Combination of life insurance and riders
For a single person, life may be free of many responsibilities. But after marriage and children, the increase in number of dependents requires a change in your insurance portfolio. As a young parent, you must give a good, hard look to your financial priorities. Revisit your insurance portfolio to ensure a right combination of life insurance cover and riders. For example, if you had taken term insurance as a young couple where a high level of sum assured wasn't affordable, opt for an increase in the sum assured after the birth of your child. Balance your insurance portfolio between the sum assured with various life insurance riders.
As proud parents, opting for appropriate life insurance cover is one of the best gifts you can give your precious child. This way, you can fulfill your aspiration of not letting unforeseen eventualities harm your child’s future.
(The writer is the CEO of BankBazaar.com)
