Can you get a term insurance for your kids?

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It can be a terrifying thought for any parent to leave their kids without adequate means to lead a comfortable life in their absence. One way to get over this worry is to take considerable life insurance cover. Financial planners have excessively endorsed term plans, arguing that these policies are the best way to cover the risk of the sudden death of the breadwinner.

Term insurance plans offer high coverage at a low cost and give out a lump-sum amount to the nominee in case of the policyholder’s demise. One often wonders if they can buy separate term insurance for their kids as well? To understand this, let’s first see how a term plan works.

How does a term plan work?

“Term insurance is a pure life insurance policy that provides financial coverage to the beneficiary of the policy, if the life assured dies during the active term of the policy. It is a cost-effective way to secure the future of your loved ones in these unexpected times. A term insurance plan provides life insurance cover against the fixed premium paid for a specified tenure as opted by the life assured,” said  Sunil Sharma, chief actuary and chief risk officer at Kotak Life Insurance. 

The life insurance cover amount opted by the life assured is paid out to the nominee in case of unfortunate demise of the life assured. As this is a pure risk plan, generally there is no survival benefit. However, certain term products which have the option of return-of-premiums, are paid out post the survival period.

Among all the life insurance products, term life insurance offers the highest life coverage for a minimum premium paid during the term of the policy.

Can you take term insurance for your kids?

Pure term insurance plan is offered only to applicants with earned income thus cannot be bought under the name of unemployed kids. Term insurance is meant to compensate for the unexpected loss of income due to the death of the life assured.

“Term plans play an important role in the life of a parent to secure the future of their children, term plans ensure that financial security of the child is maintained in case of any unfortunate loss of the earning parents. Hence, in principle, pure term insurance should be taken on parent’s life to secure their child’s future and not on the child’s life,” Sharma asserted.

Term plans are generally offered to earning members or parents to secure the child’s future. However, with the cost of education skyrocketing, educational loans have come to play a pivotal role as they intend to help anyone who wants to pursue higher education.

“To support parent’s and children’s pursuing for higher education through an education loan, term insurance cover is allowed on the student`s life. Students with an education loan on self and sum assured up to the amount of education loan, can be offered term insurance cover,” Sharma concluded.