Children’s Day: Key things parents must check before buying insurance for kids

With Children’s Day observed on November 14, parents may be looking at ways to secure their children’s financial future. While investments and savings help build a corpus for milestones such as higher education, insurance can play a different role by protecting these goals against financial uncertainties and providing a cushion against medical expenses.

However, life insurance and health insurance serve different purposes.

While child-focused life insurance plans can help parents save for future milestones and ensure continuity of financial benefits in their absence, health insurance helps cover eligible medical expenses arising from hospitalisation and treatment.

Choosing the right policy requires parents to look beyond premiums and advertised benefits. The coverage, exclusions, waiting periods, premium affordability and conditions governing claims can influence how useful a policy is when the family needs it.

Here is what parents should know before choosing insurance for their children.

Child life insurance: How does it help secure future goals?

Child-focused life insurance plans generally combine a savings component with life cover. Depending on the product, they can help parents accumulate funds for future expenses such as higher education, professional courses or other important milestones.

One feature parents should examine is the waiver of premium benefit. Under this provision, if the insured parent dies during the policy term, future premiums may be waived while the policy continues, subject to the policy’s terms and conditions. This is intended to ensure that the child’s financial goals are not disrupted because of the parent’s death.

Another feature is milestone-based payouts, under which a policy may provide money at specified stages rather than only at maturity. This can help parents plan for expenses that arise at different points in a child’s life.

Vikas Gupta, Chief Product Officer, ICICI Life Insurance, said child insurance plans can offer four broad benefits: goal-based wealth creation, milestone-based payouts, life cover and waiver of future premiums.

He said parents should assess future education costs, the timing of payouts, adequate life cover and premium affordability before selecting a plan.

For instance, parents planning for higher education expenses several years later may want to examine whether the policy offers increasing or staggered payouts that correspond with the expected timing of these expenses.

However, parents should also compare the guaranteed and non-guaranteed components of a policy, surrender conditions, charges and the actual benefits payable on the death of the insured parent. A savings-oriented insurance policy should not automatically be treated as a substitute for an adequate term life insurance policy.

Child health insurance: What coverage should parents look for?

Health insurance addresses a different financial risk: medical expenses. Children can generally be included in a family floater health insurance policy, under which the family shares a common sum insured.

Depending on the insurer and policy, standalone health insurance options for children may also be available, subject to entry-age requirements and eligibility conditions.

Girish Sehgal, Chief – Health UW & Claims, Customer Service & Operations, ICICI Lombard, said parents should look beyond the premium and assess the breadth of coverage, hospitalisation benefits, pre- and post-hospitalisation expenses, daycare procedures, waiting periods and exclusions.

Arun Ramamurthy, Co-founder, Staywell.Health, also advised parents to focus on the coverage offered, waiting periods, exclusions and the insurer’s hospital network rather than concentrating only on premium payments.

Among the important features to examine are:

• Hospitalisation expenses: Check the coverage available for inpatient treatment and whether there are restrictions on specific categories of hospitalisation.
• Daycare procedures: Certain medical procedures do not require a 24-hour hospital stay. Parents should check which daycare treatments are covered.
• Pre- and post-hospitalisation expenses: Understand how many days of medical expenses before and after hospitalisation are covered.
• Emergency care: Check the provisions for emergency treatment and associated expenses.
• Room-rent limits and sub-limits: Some policies impose restrictions on room categories or specific treatments. These can affect the admissible claim amount.
• Waiting periods and exclusions: Examine waiting periods for pre-existing diseases and specified illnesses, along with treatments or conditions that are excluded from the policy.

The hospital network is another important consideration. Parents should check whether hospitals in their preferred locations are part of the insurer’s network and understand the conditions for cashless treatment.

Sehgal said parents should also assess whether the sum insured and hospital network can accommodate the child’s changing healthcare needs as they grow.

Family floater or individual health insurance: Which should parents choose?

A family floater policy can be a convenient option for parents looking to cover themselves and their dependent children under one policy. However, the sum insured is shared among all covered members.

For instance, if a family has a health insurance cover of ₹10 lakh, the entire amount is not separately available to each insured member. Hospitalisation claims by one or more members during the policy year reduce the available cover.

Parents should therefore evaluate their family size, existing health insurance, healthcare requirements and the possibility of multiple claims before deciding on the sum insured.

Depending on the insurer, children may also be eligible for individual health insurance policies. Parents should compare the coverage, eligibility requirements and costs before deciding between the two options.

Ramamurthy said parents should check the maximum age up to which a child can remain covered under a family floater policy and whether the insurer allows the child to transition to an individual health insurance policy later.

This is important because eligibility conditions and age limits can vary across insurers and products. Parents should understand the applicable conditions for continuing coverage when the child reaches the specified age, rather than assuming that the existing policy will automatically continue under the same terms.

What about newborn health insurance coverage?

Some health insurance policies offer maternity and newborn benefits, either under the base policy or through specific add-ons.

These benefits may provide coverage for a baby from birth or after a specified period, depending on the policy. However, parents should check the applicable waiting periods, coverage limits, newborn inclusion conditions and exclusions.

Sehgal said certain policies provide maternity and newborn benefits, subject to the selected add-ons and policy terms.

Parents planning to have a child should therefore examine these provisions while selecting a health insurance policy rather than assuming that newborn coverage is automatically included.

Is one type of insurance enough to secure a child’s future?

Life insurance savings plans and health insurance policies address different financial risks and should not be viewed as interchangeable.

A child-focused life insurance plan may help fund future milestones and protect savings goals in the event of the insured parent’s death. Health insurance, meanwhile, helps meet eligible medical expenses.

Parents should first ensure that the earning members of the family have adequate life insurance, as their income is usually the foundation of the child’s financial security. Adequate health insurance for the family is another important part of financial planning.

The choice of child-focused insurance products should ultimately depend on the family’s financial goals, existing protection, affordability and the specific terms of the policy. Rather than buying a product simply because it is marketed as a child plan, parents should assess whether its benefits address an actual financial or healthcare need.