Education insurance: What does it mean?

Education insurance is an insurance product that in my opinion does not fall into the basic category (must have). If you follow my writing on OneAset, then you will know that I have made a list of must-haves in the past: life, accident, critical illness and health insurance. Well, there is no education insurance right?

Through this article I will explain why education insurance not is a must-have insurance, so it is only natural that OneAset has not yet sold this type of insurance.

Education insurance, in my opinion, is essentially just life insurance for children which is packaged under another name. Educational insurance has a function similar to endowment insurance, where there is a combination of functions between protection and investing in a product.

The difference is that education insurance is specifically for prospective policyholders who are still young (usually under 18), so premiums tend to be affordable and have a fairly high sum insured. Usually, the sum insured will be disbursed if the insured dies, or is permanently disabled or suffers from a critical illness (depending on the extent of the product). Thus, from here we can already judge that education insurance has a function similar to common life insurance

Then where is the investment function? Education insurance generally disburses part of the sum insured within a certain period of time. This amount is usually advertised as financial aid for the children’s education expenses.

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In order not to be confused, I try to give virtual example educational insurance products that do not exist in the real world.

“Siaril brand education insurance has an annual premium of 5 million rupees for 5 years, with an insurance amount of 250 million rupees. In the sixth to tenth year, the insured will receive a cash benefit of 6 million rupees and in the tenth year the insurance period ends. If the insured dies or becomes permanently disabled during the insurance period, the total sum insured will be disbursed. “

Well, based on the above example, we can see that there is an investment benefit that generates 5 million rupees over a period of 10 years, because the total premium paid is only 25 million (5 million x 5 years), but the insured will receive a total of 30 million (6 million x 5 years) within 10 years. After all, there is a potential yield of 2% per year given.

This is the benefit of investing in education funding (eg paying tuition). In the above example, cash benefits are paid annually, but there is also education insurance that provides cash benefits on a 3-year basis (according to the education levels of the Gymnasium and Lyceum).

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In addition, there is a protection allowance, where if something unpleasant happens to the insured, the parents will receive compensation for the reduction of the expenses they had or will arise so far. In the example above, if the insured dies, he gets 250 million rupees.

Basically this is the function of education insurance. Although it seems interesting because it provides protection and investment functions, we can see for ourselves that the potential return tends to be very small (although the above example is only fictitious, you can see other real insurance products for comparison). This potential yield is much lower than the Siji Fixed Link sold on OneAset and the SIji Fixed Link is even higher because it has a short lead time (3 months) as well as one-time cash benefits. Of course, the investment benefits are accompanied by protection benefits.

So is it necessary to buy training insurance? I do not think it is necessary, because it is better to buy dual insurance, such as Siji Fixed Link, or invest your funds in other conventional investments with higher possible returns. However, also continue to insure your child with other traditional life insurance.

But, in the end, you can decide for yourself whether it is necessary or not. Education insurance frees you from the complexity of the investment world, because it has a fixed return character and you do not have to worry about managing many financial products at the same time.

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