Introduction
Child life insurance refers to the type of permanent life insurance that is designed to provide financial protection for minors. It provides death benefit to the beneficiary (guardian) if the child passes away. It provides protection for the entire life of the kids. In this post we are going to highlight general pros and cons of child life insurance plan.
Benefits Or Advantages Of Life Insurance For Children
The main advantages of child insurance can be pointed out as follows:
1. Provides Financial Security
The most important advantage of buying child life insurance is that it provides lump sum maturity benefit that helps to cover the financial needs in the future. Therefore, it provides financial protection for kids and their family.
2. Lower Premiums
Because of young age and less health risk of the kids premiums in child life insurance plans are lower than adult people's life insurance policies. Therefore, it is affordable and cost-efficient type of insurance plan.
3. Tax Advantage
Another benefit of kids life insurance is that premiums can be deducted from taxable income. So, it helps to save tax.
4. Provides Peace Of Mind
As we know that child life insurance provides life-long financial security for the children it provides peace of mind to the guardians because they know that their kids are financially safe.
5. Provides Death Benefit
Parents get death benefit in case of untimely death of the child. It can be used to cover burial expenses.
6. Borrowing Facility
Insurance companies provide loan on the basis of the cash value of insurance policy. So, policyholder can obtain loan in lower interest rate.
Drawbacks Or Disadvantages Of Child Life Insurance
Some of the main disadvantages of child insurance can be pointed out as follows:
1. Difficult To Understand
One of the major disadvantages of child life insurance is that it is complex and difficult to understand. Different companies offer different schemes and offers to attract customers that creates confusion among the policy buyers. It is difficult to find out right insurance company to get maximum benefit in reasonable premiums.
2. Limited Return
Child insurance generates lower return than other forms of investment options. Premiums paid for child insurance can be invested in other high yielding financial instruments to generate higher return.
3. Limited Coverage
Kids insurance offers limited financial coverage than adult life insurance plans. So, it may not be beneficial in the long run.
Also Read
Key objectives of child life insurance
Main features of child insurance plan
4. Possibility Of Policy Lapse
It requires long-term commitment to buy life insurance policy for minors. If premiums are not paid on time because of tight financial condition then insurance policy will be inactive. In this situation insurance policy may lapse.
Pros And Cons Of Child Life Insurance In Short
Pros:
* It provides life-long financial protection
* It provides tax benefit
* It offers peace of mind
* It provides loan opportunity
* It offers death benefit
* It provides huge maturity benefit
* It builds cash value
Cons:
* It is complex to understand
* It is difficult to find right insurance company
* It offers lower return than other options
* It requires long-term commitment
* It provides limited coverage amount