Avoid These 5 Common Mistakes While Buying a Child Plan child plan

Posted by Shaheen Shaikh on April 24th, 2024

Planning for your child's future is a significant responsibility, and investing in a child's education insurance plan is crucial for securing their financial well-being. However, many parents often make mistakes during the purchasing process that can impact the plan’s effectiveness. Here are five common mistakes to avoid when buying a child plan:

• Ignoring the Future Education Costs:

One of the most critical aspects of a child plan is to ensure enough funds are available to cover the cost of education when the time comes. Many parents only consider current educational expenses, failing to account for the significant cost increment over time. Whether for higher education abroad or professional courses in India, education expenses are expected to rise substantially. In such cases, consulting with financial experts can help estimate future educational costs accurately.

• Neglecting Your Risk Appetite:

Understanding your risk appetite is essential when investing in a child plan. While higher risks may lead to potentially higher rewards, not everyone is comfortable taking such significant risks, especially when it involves their child's future. You must balance risk and reward by opting for a plan with a suitable risk level that aligns with your long-term investment goals.

• Choosing Wrong Policy Term:

Selecting the right policy term is vital to ensure the plan matures when you need the funds most. Choosing a policy term that is either too short or too long can adversely affect the plan's effectiveness. You should carefully assess your child's future needs and match the policy tenure accordingly. For instance, if funds are required for higher education in 17 years, opting for a policy term significantly shorter or longer than that may not be beneficial.

• Not Insuring Your Life:

While the primary focus of a child plan is to secure the child's financial future, it's essential not to overlook the importance of insuring your own life. Your life cover protects your entire family, ensuring they are financially secure in case of an unfortunate event. Additionally, adequate life insurance coverage can support your child in your absence and fulfill their future financial needs.

• Starting Late:

Time is a crucial factor when it comes to investing, and starting early can significantly impact the effectiveness of a child's plan. Parents who delay purchasing a child plan may end up paying higher premiums and may not have sufficient time to build a substantial corpus for their child's future needs. Starting early can help you benefit from lower premiums and ample time to accumulate funds for your child's education and other milestones.

Buying a child plan requires careful consideration and planning to ensure it meets the child's future financial needs. Avoiding these common mistakes and seeking expert guidance can help you invest in the best child education plan and secure your child's future.