Get to Know Children's Education Insurance: Definition, How it Works, and The Risks

Having children is a great responsibility. In addition to meeting their needs now, parents also often have to think about their needs in the future. One of the most important is education.

Sadly, education funding is getting higher and higher in all aspects. Both money to buy books and uniforms, base money, for the monthly tuition fee of the school. Therefore, planning for children's education funds is needed since he was a child.

You can do this through education savings or by using education insurance products. Well, maybe before you choose between the two, you can get to know more about children's education insurance in the following article.

What is child education insurance?

Education insurance is a type of insurance that provides protection for children's education in the future accompanied by investment. Your best options for education insurance are products that not only offer investment, but also life protection for parents or breadwinners.

One of the reasons why people might choose education insurance is because of the ever-increasing cost of education. This makes just saving less than enough because of inflation. However, make sure you also understand the benefits along with the risks before you choose this type of insurance.

So what are the benefits?

Basically, there are 2 main benefits of education insurance, namely high inflation of education costs and risks to parents.

Inflation of education costs

The increase in tuition fees is not fooling around. According to data from the Central Statistics Agency in Indonesia, the increase in base money alone reaches 15% per year. It has not calculated the increase factors of the monthly tuition, uniform money, books, and others.

Not to mention if you plan to enroll your little guy in a private school. As reported by CNBC Indonesia, the increase in private education costs can reach 40% per year. Even though the estimated calculations of the Super You team, the total cost of schooling in 2030 will reach Rp3M.

Risks to parents

Although we love our children, we can't always exist for our children. Especially if an unexpected and unpleasant risk occurs to us. For example, the risk of retirement when the child is still in school, accidents, falling ill, or experiencing physical disabilities so that they cannot provide until they die.

We pray that it doesn't happen to us. However, if that happens, children's education can continue with education insurance. This is because education insurance usually has an element of life insurance for parents.

How does education insurance work?

Education insurance generally has an element of investment. Therefore, education insurance tends to contain unit links (not pure insurance).

It works more or less like this:

The customer pays the premium to the insurance company;

Investment managers in insurance companies invest premiums in investment instruments, such as Mutual Funds or Debt Securities;

The investment manager gets a return (profit) from the results of the investment and reports it to the customer at the end of the year;

At the time specified in the policy, usually, when the child is about to enter the school level, the customer can file a claim for the investment proceeds and get a sum insured.

Education insurance risks

Of course, education insurance is not free from risks. Where there is an investment, there must be an element of risk. Therefore, make sure you at least know about the risks of education insurance before buying.

In contrast to education savings

Maybe you think that paying education insurance premiums is the same as saving every month. You even get a profit because of the return on investment. However, investments also have a risk of loss, either in part or in whole.

There are additional fees

Many customers think that they must get a much larger amount than what you deposited through the premium. Although it does contain elements of investment that can bring profits, you need to remember that there are additional costs. For example, admin fees, insurance costs, and various other types of costs.

In the first 5 years, the premium you pay will be deducted from these costs. Therefore, the amount of your investment at the beginning will not be too much.

Premium deposit extended

Imagine if you have bought education insurance where the premium deposit is short-term. However, your investment is not yet profitable and there is not enough sum insured to be achieved. This can lead to an extension of your premium deposit period.

Mistakes in choosing investments

It is not impossible that the investment manager in the insurance company has missteps. If they invest your education funds in the wrong instrument, then you will not experience profits and lose money.

Have not read or understood the provisions in the insurance policy

If you really want to consider whether the education insurance product you choose is right, you need to read the insurance policy to understand. If you don't understand something, you can search on Google, ask the agent directly, and find the right consultant.

In addition, you also have the right to cancel the policy if it is not appropriate. You will have a policy review period that is usually valid for the first 14 days. If you feel that it is not appropriate, you can cancel without incurring any charges.