Child plans have become essential options for younger parents looking to secure their children’s future from an early stage. This is even more vital when considering the skyrocketing costs of higher education and inflation. Therefore, it becomes imperative to safeguard your child’s financial future by investing in a suitable child plan as early as possible. These are specific life insurance plans tailored to meet the financial needs of parents and their children. Here’s learning more about the same.
Knowing more about child plans
A child plan is a type of life insurance that allows parents to build savings and financially safeguard their children’s futures. These plans are usually specialised ULIPs (unit-linked insurance plans) or endowment plans that combine investment and insurance.
The life coverage is available as a lump sum amount at the closure of the policy tenure. After that, payouts are flexibly provided at each vital milestone that the child achieves. Parents usually choose these plans to ensure financial safety for their children, even when they are not around.
This is all the more important since life is always uncertain, and one never knows what may happen in the future. You may use a life insurance calculator to determine the approximate returns you can expect to plan accordingly.
Why are child plans beneficial?
- Child plans help save and invest to meet higher education costs in the future
- There is more flexibility in investing based on the present financial scenario and your risk appetite
- Life coverage is also offered up to ten times the annual premium amount
- Partial withdrawals are sometimes available as per requirements. This can help in meeting any emergency educational costs and other needs of your children.
- Tax benefits are also provided on the premiums paid for these plans (up to Rs. 1.5 lakh) under Section 80 (80C) of the Income Tax Act of 1961. The interest you earn and the maturity amount are also free from any tax liabilities under Section 10 (10D).
- Premium waivers are integrated into these plans and apply when the parents are no longer around. Children are not burdened with the responsibility of paying premiums in case of the untimely death of their parents within the policy period. The insurance company will cover the same, while the policy will stay active. Yet, this feature may vary across insurance companies.
- Child plans offer a chance to surpass inflation, which is rising yearly. If you consider a simple equation, higher education costs are going up by approximately 5% yearly. An engineering course that costs Rs. 16 lakh today could be priced at Rs. 40 lakh in ten years and even more in the future. You need to be prepared to meet these costs without the need for dipping into your entire savings down the line. This is one of the most prominent advantages of these plans.
Why you cannot neglect child plans
You will naturally want only the best for your child as a parent. Their well-being, care, grooming, education, and financial future will be foremost on your mind. Child plans are indispensable to keep up with inflation and the soaring costs of higher education. They can help you meet educational expenses in the future without any constraints, while you do not have to take out a lump sum from your life’s savings for the same. You need not also take a hefty loan in the future for your child’s higher education costs. Instead, you can invest now for your child’s educational needs in a decade or even further down the line.
You can also invest in helping your child cover their wedding and other costs in the future. This future corpus may also help your child buy a home, get a vehicle, and even be a seed fund for their entrepreneurial aspirations.
A child plan is a long-term investment which can help you teach financial discipline.
To conclude, you should not neglect these plans. After all, the uncertainty of life is its only certainty! You never know what lies around the corner.
You would want a scenario where your child can comfortably maintain their lifestyle even when you are not around while covering their higher education and professional pursuits and even getting them married comfortably. If this is your overwhelming desire, a child plan must be in your portfolio. Of course, you can invest small at the beginning and gradually scale it up as your income increases. But remember that the objective is to earn inflation-beating returns and you should thus stay invested for the long haul to reap the rewards of your investment.
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