Buying Life Insurance Policy For Your Grandchildren? Everything You Need to Know

As a grandparent, you might want to gift the whole world to your grandchildren, but a gift of value is what will protect their future. A souvenir, such as a life insurance policy, is likely to serve as a future financial guarantee. It has passed the test of time and will protect your blood in times of need. However, a life insurance policy has to be bought after careful consideration and research to ensure that it serves its purpose correctly.

1. Types of Life Insurance Policies

There are various types of life insurance policies for your grandchildren. These typically include whole life policy, Unit Linked Insurance Plan (ULIP), endowment policies, or a guaranteed return insurance plan. Each has its advantages and disadvantages; however, the choice depends on the objective of the grandparent for the policy.That said, the most commonly preferred form of grandchildren insurance is a ULIP. It provides triple benefits in terms of life safety, capital creation and tax savings. A portion of the fund is directed towards life coverage, while the remaining is invested in market funds to help accumulate wealth over time.

2. Eligibility Criteria

Grandparents, as extend caregivers and hence insurers, love to buy policies for their grandchildren. However, the criteria can vary from state-to-state. Also, in certain policies, the grandparents might first need a ‘no objection’ certificate from the parents.For the child, the minimum age depends on the insurer and the type of policy. Some policies can be purchased even at the birth of the child; while in other cases such as savings and education plans , there may be a certain age limit.

3. Sum Assured, Premium, Tenure and Benefit

The insurance sum depends on three factors, including the purpose of the policy, long-term affordability, and tax-advantages. A sum which secures the purpose is within the budget and also provides tax-advantages is considered ideal. This is also reflective on the policy premium, which is further influenced by the age, health of the child, and type of policy. The sooner you purchase the policy, the lower the premiums will be.In terms of tenure, the decision rests on the purpose and type of policy. Generally, an insurance plan is 25-40 years long; however, in some cases, it can also be 99 years (whole life insurance) or be 25-30 years (newborn).In all, life insurance for grandchildren must be brought after in-depth analysis. Even though insurance is highly underrated in India, it is the ideal way to secure the family and pass on a lifetime gift.

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.