Planning to Have Kids? Invest in Life Insurance for Children’s Future

Planning to expand your family can be an exciting journey. It’s a lifelong commitment that requires careful financial planning. After all, every parent wants a financially stable life for their children.

So did Arjun and Manisha. They were on top of their careers, happily married, and with two young kids. They wanted to give their children the best education and wanted them to pursue their dreams without any financial constraints. But on one unfortunate evening, when she was driving home from work, Manisha was in a deadly accident that took her life.

Her family was left with just one source of income and two little kids with big dreams. While in normal circumstances, they would have experienced a change in their lifestyle, Manisha and Arjun had smartly planned for term life insurance worth ₹2 crores each right after marriage. The amount from the term plan was enough to secure the kids’ future financially and ensure their dreams weren’t hampered after Manisha’s untimely demise.

If you’re planning to have kids too, it’s important to make smart financial choices like Arjun and Manisha to ensure their financial well-being in your absence.

Importance Of Life Insurance When Thinking about Having Kids

• Financial Security

As long as your child isn’t financially independent, their financial needs lie on your shoulders.  The cost of raising a child in India is skyrocketing by the day, with private schooling alone costing in Lakhs. Life insurance ensures your kids and dependent family members do not struggle financially if you are not there for them. It provides a safety net, helping them cover their day-to-day expenses, maintain their living standard without compromise, complete their children’s education and/or achieve their future goals.

• Debt Coverage

 If you have existing debt like a mortgage or personal loan, the repayment burden will fall on your family after you’re gone. If you’re the family’s sole breadwinner, this can affect their financial health for years to come.  Life insurance can be a critical asset in such situations, ensuring your family isn’t burdened with debt repayment in your absence.

• Savings for Education

Education inflation in India is twice the inflation rate at an alarming 11%-12%. This means if your child wants to pursue a degree that costs ₹10 lakhs today, it will cost approximately ₹41 lakhs in the next 15 years, considering a consistent inflation rate. A life insurance policy can be a valuable investment to support your child’s educational aspirations.

• Inheritance Planning

Every parent wants to leave behind some assets that will serve as a financial foundation for their kids. Life insurance can be one such option. The funds from the policy can help create an inheritance for your children that they can use to build their futures, regardless of other assets you may or may not have.

• Long Term Goals

Beyond immediate needs, your life insurance policy can contribute towards the long-term goals of your children like funding higher education, starting a business, or buying a house. This ensures their long-term goals aren’t hampered when you’re not around.

• Peace of Mind

One of the most valuable benefits of life insurance when planning for kids is the peace of mind that comes with knowing that your family will be financially secure even when you’re not there to provide for them. This lets you enjoy big and small moments with them without the constant worry of “what if.”

What Type Of Life Insurance Should You Get ?

When planning for your children’s future, it’s crucial to select the right type of insurance. Here are some options you can choose from:

• Term Life Insurance

A term plan is a pure life cover that provides a death benefit to your family if you pass away within the specified term. The standout feature of term plans is that you can get coverage as high as ₹ 7.5 crores at very affordable premiums. However, your family will not receive any benefits if you outlive the policy term. Term life insurance is an excellent option to create a safety net that ensures your partner and children have the financial means to maintain their lifestyle and meet future goals in the event of your untimely demise.

• Whole Life Insurance

Whole life insurance, as the name suggests, covers you for the duration of your life or up to 99 years. It pays a death benefit to your family upon your passing, making it a great option for long-term financial planning without the need for renewal. However, the user still needs to pay every day until the set premium payment term.

• Unit Linked Insurance Plans (ULIPs)

ULIPs combine the benefits of life insurance and investments. With ULIPs, part of your premium is paid towards a life cover and the remaining is invested in a fund of your choice. This can help you build a corpus for the future needs of your children while protecting their financial well-being in case of your demise. But remember, since these plans are market-linked, the returns will vary based on the selected funds and market trends.

• Retirement Plan

A retirement plan is designed to provide financial stability in your golden years, but it also plays a crucial role in financial planning. By securing your retirement, you ensure that your children are not burdened with your financial needs later on. It also provides death benefits to your family in case of your demise during the policy term.

• Guaranteed Return Plans

Guaranteed return plans offer the core benefits of life insurance along with a fixed or customisable return or income options over a long period of time. Among all the existing types of life insurance plans, a guaranteed return plan can be considered a reasonable speculation in case you are seeking a life insurance cum investment plan with secured returns.

Key Takeaways

Securing life insurance is critical for couples planning for kids or expanding their family. After all, it’s not just about providing for your children after you’re gone but also about securing their dreams and ensuring they have a solid financial foundation to build their futures.

Consider platforms like PhonePe for a seamless and hassle-free insurance purchase experience.