NSURANCE FIRMS BET BIG ON CHILD COVER

Bangalore: Child insurance is one of the biggest growth areas for the insurance business in India, driven by the rising cost of education and parents' desire to secure a good future for their children. At ING Life, children's plans contribute over 20% of the total business currently, up from about 8% a year ago. At HDFC Standard Life, children's plans are a third of the total business. Max New York Life Insurance (MNYL) says the number of consumers opting for children's plans grew by about 50% in 2007-08, compared to the year before. The annual growth rate till then was about 10%-15%. Insurance companies say that in the last one year, most parents buying children's policies did so mainly to fund their children's higher education. Education is one of the most certain needs that cannot be deferred unlike other needs. "Providing good education, establishing a professional career or even doing a modest wedding is expensive. Every parent needs significant savings to support their children to take these important steps in life," says Sanjay Tripathy, executive head (marketing) in HDFC Standard Life. Manik Nangia, head of product management in MNYL, says child insurance has become more easy to market compared to regular endowment plans. He attributes this to higher levels of awareness and the rising costs of education. According to the MNYL-NCAER India Financial Protection survey, 85% of the addressable households save for children's education. Parents normally choose a term that coincides with the child turning 18-25 years of age. This varies depending on the targetted milestones -- child's graduation, higher education, marriage. The plans offered by insurance companies help to build a fund for your child's education, and offer an insurance cover alongside. There are several concerns that determine which plan you should go for, including how much you would need for your child, the level of security. Wealth advisors say savings for children must be fairly protected. The chosen plan could offer payouts at critical milestones of the child's career, followed by a lumpsum payout when it matures. "The insured can be either the parent or the child. In case of death of the parent, a lumpsum amount is made available to the child and future premiums are waived off," said Amit Gupta, marketing director in ING Vysya Life Insurance. ING has a unit linked savings plan that gives education payouts of 20%, 30% and 50% of the fund value during key milestones of a child's higher education. MNYL's children's plans also offer cover against dread diseases. "This is because even a critical illness can impair one's earning ability and financial well being," said Nangia. Financial planners suggest that if you are a conservative investor, you should go for a traditional insurance product with a mutual fund SIP (systematic investment plan) for a longer period.

Source: The Times of India