SFM meets up with Mr. Janarjan from Ginger Assurance Pvt. Ltd. to learn more about the child insurance schemes in Nepal.

Child Insurance provides its customers with double risk coverage while also allowing parents to save money for the future. That is why in today’s modern time, it is necessary to choose insurance over fixed deposit. - Janarjan

All parents want nothing less than the best for their children. It is the same when it comes to child insurance. While, like every scheme in the financial market, child insurance does have a few setbacks, this insurance plan is in general a golden opportunity for parents to secure financial well-being of their children.

But before we blatantly decide that child insurance is ‘the best thing’ to do, let us go through what the insurance scheme is all about.

What is child insurance?

Child insurance is an endowment plan for a child, which - unlike Nepal’s typical term life insurance -   will have a maturity value. What that means is that when the policy matures or on conditions of death, the death value will be a sum total of the exact amount of the sum insured and the bonus amount accumulated over the course of the insurance.

 When should parents buy the insurance?

Child insurance plan can be issued for any child who is in between the age of 1 to 11. Since the minimum maturity period is 7 years, no child above 11 is eligible for the insurance. Otherwise, the child will be a legal adult –above 18 years old – before the minimum maturity period is over.   

Where do we get the service?

One of the places in Nepal where parents can avail this service is Nepal Life Insurance under the name of Keta Keti Beema Yojana. Keta Keti Beema Yojana offers low premium rate, high bonus rate, and has wide area coverage.

 Who is the insured and insurer?

The insurer is one of the two parents, usually the bread-winner of the family. Thus, to be specific about Nepal, the insurer – also called the proposer – is usually the father. And the insured, obviously is the minor, i.e. the child in the family. In case of the death of the child, the nominee gets the life value (total of the sum insured and accumulated bonus within the death date). The nominee may or may not be the parent. It totally depends on the insurer to declare who the nominee of the insurer will be.    

Why is child insurance a good scheme?

  • Much more than just an investment

Most Nepalese people go after fixed deposit with a blind eye. But child insurance allows having both savings and risk coverage. Child insurance gives the family an immediate access to money in emergencies, for sudden medical expenditures, and during accidents. Though there is a downside of this policy: the policy coverage only starts either when the child is 7 years old or 5 years post the issue date of the child insurance. The proposer can, however, buy an ‘Additional Child Risk Coverage Scheme,’ in which case the policy coverage starts either when the child is 5 years old or 2 years post the issue date of the insurance.

  • Collateral loans

Although a lot of insurance plans can be used to take out collateral loans, child insurance cannot be used as collateral to avail a loan. This is because the minor does not have a decision-making ability and in order to prevent any kinds of misuse of the funds allocated for the child, a loan is not issued with this policy.  

  • The benefit of premium waiver

God forbid but if the child loses the parent who is also the proposer of the insurance, then the insurance company waives the premium charge for the child until the child reaches the age of maturity. However, the catch is that the child is liable to pay the last premium amount which is when the child is 18 years old in order to claim the insurance amount when he or she turns 19.  Additionally, if the child insurance scheme is paired up with ‘Premium Waiver Benefit,’ then the child is also eligible to receive monthly compensation after the death of the proposer.

  • Funds for the future

The average current rate in Nepal is 6.5 per thousand. According to today’s interest rate, the maturity value that the insured receive at the end of 15 years period is almost double to the amount of sum insured. And the interest rate has been increasing over the past few years, which suggests that the profit margin for the insured is also most likely to increase. Thus, when the insurance matures, the child –now an adult – will have access to a huge amount of fund which he or she can use to fund his or her education, travel plans, startup capital, and even wedding.

  • Financial backup while grieving

It is a fact that funerals these days cost a fortune. That is why, just in case the child dies, this insurance scheme helps the family by reducing its financial burden regarding the cost of the funeral service. Additionally, the parents will also be financially able to build a trust or establish something special in the memory of their child with the money from the insurance plan.