Q. 

We are considering purchasing child life insurance (Ulip) for our little girl. We have been reading various articles in the media and are seeing a lot of different views on this. My husband told me that you do not answer specific queries, but I still took my chance. What are your views?

A.

No. Nein, Nyet, Nahi, Vendam, Nako, Nathi, …just to reiterate NO. Not no, but heck no. Child life insurance, like most endowment insurance, is a product made to be sold, not bought by you. It is an amazingly easy sell, and hence all insurance agents have a portfolio of ‘child’ policies. Media, toes the advertiser’s line. Let me give you a few reasons….

# 1 Your Child Has No Income The main, core, sole purpose of life insurance  (always) is to replace the earned income of a breadwinner. There is no other reason for buying life insurance – forget what the life insurance salesman tells you.

If you are financially independent, you don’t need life insurance.

If there is NOBODY dependent on you, you do not need life insurance.

If you depend on someone else for your income/lifestyle, then you don’t need life insurance. That person who is funding your life style needs life insurance – with you as a nominee. Now, a solid case can be made to carry some life insurance if you contribute in an economic way to a household. I have no doubt in my mind that if, heaven forbid, somebody loses a child to death, household expenses would go DOWN, not up.

# 2 Funeral expenses are not that high

I found a bank RM take this line of thinking that you should buy life insurance on your child to pay for their funeral expenses.  I think this is absolute, absolute, total bullshit. Typical saleswoman talk of “policy is cheap now” argument. You do not buy insurance because it is cheap. You buy insurance because you need life insurance. If your emergency fund is not enough to cover a decent funeral, I do think you have a much bigger financial problem, do drop in a mail, you really need help.

#3 Relationship Manager is calling you every hour

I can find this as a painful reason to buy life insurance – even for your dog, but there are cheaper solutions. Call your relationship manager and ask her to put your relationship on ‘passive’ – the number of calls will go from 4 a day to 1  a quarter. That is easier to handle. The minute you buy one product, they will keep pushing you for more. It is like any other abusive relationship – the time to say NO is when it happens for the first time!

#4 It preserves insurability? MY foot.

Some people buy life insurance for their children thinking it will be good for them just in case they contract some illness at a young age – it preserves their insurability. Wrong. Their life insurance need as an adult is likely to be Rs. 10-12 crores of TERM INSURANCE, HOW will this piddly policy of Rs. 20L help at all? You really think that this 20L ULIP is going to make any kind of significant dent into that kind of need? What a joke. Yes your RMs’ monthly target or quarterly target will be me.  This is not a disability insurance or medical insurance which can help you with cash flow if something were to go wrong. There’s no guarantee they can actually buy more life insurance at a reasonable price later – the rule is you should not trust a BFSI company.

..more to come…soon…