Imagine your little one coming to you with high hopes and narrating their dream of becoming a doctor. Your heart is filled with pride in the moment, but then it hits the sudden realisation- would you be able to support their dreams when the time comes?
With factors like unpredictable life events, rising costs of education, inflation, and more, your little one’s dreams can be in danger if not handled properly. Get ready for some hard truths. Did you know, in the last few years, the cost of primary education in India rose by 30.7%? That’s not all, graduate and post-graduate courses saw an increase of 5.8% and 13.19% respectively between 2014 to 2018.¹
The average expenditure on education has nearly doubled over the last decade. And the fear of life throwing curveballs at you always hovers over you. Amidst such circumstances, waiting for your child to be 20 and then planning savings can be a bit late. Here comes a child insurance plan. This financial protection tool aims to reduce the gap between the financial restrictions and your child’s dream.
What are Child Insurance Plans?
Child insurance plans are unique, specialised products that come with the benefit of both insurance and investment. These are designed to help you secure the financial future of your kids even when you’re no longer around to fulfil them. These long-term investment plans can be used to fund several goals, including your child’s education, career development, or even marriage, and more.
Here are some of the features of insurance plans:
- These are available in both options: guaranteed and market-linked.
- Typically, these mature once the child becomes an adult, typically between the ages of 18 and 25.
- These plans offer immediate support with a lump-sum payment in case of the untimely demise of the parent, along with the waiver of premium features.
- The waiver of premium ensures the policy remains active and the child receives the maturity benefit in case of the untimely demise of the parent. The remaining premium is covered by the insurer, ensuring guaranteed support.
- Designed for long-term goals to support your child’s milestones.
Types of Child Insurance Plans
Typically, Child Insurance Plans are of two types. Consider having a look at their details.
- Guaranteed Plans
For individuals looking for steady returns with fixed, predictable returns with no-risk, guaranteed plans can be a suitable choice. Here, the cash flow is assured with little to no correlation with market volatility and fluctuations.
- Market-Linked Plans
Market-linked plans, on the other hand, are suitable for those who are open to market volatility, willing to take risks to meet high returns over a long period. The benefits here fluctuate as per the market conditions.
Benefits of Child Insurance Plans
Here are some compelling benefits of a child insurance plan that you might look out for.
- Goal-Based Payouts
Generally, with child insurance plans, you may set predetermined payouts for major life events of your children. For instance, 18 for an undergraduate education plan, 27 for marriage, and so on.
Tip: To plan these payouts wisely and choose an appropriate cover, you may use a child plan calculator. This helps you calculate future costs accurately, like expected education costs, and more. You may also use the same to compare different child plans.
- Compounding Benefits
Another benefit of investing in child insurance plans is taking advantage of the compounding benefits. These can be understood as earnings of your initial amount and interest. This means with child plans, the earlier you start, the better. You can build a sizable corpus for your children’s needs.
- Tax Benefits
With child insurance plans, you are also eligible to avail of the tax benefits on premiums paid under section 80C of the Income Tax Act. These tax benefits make your policy more affordable by reducing the overall costs.
- Life Cover with Waiver of Premium
With child insurance plans, the child gets the immediate lump sum amount in case of the untimely demise of the parent. Additionally, the WOP feature ensures your policy remains active and remaining premiums are waived off and covered by the insurer.
- Peace of Mind
Another prominent benefit of child plans is the peace of mind. With these, you know you’ve done enough to secure the major milestones of your kid, and their financial future is protected.
Over to You
As parents, you obviously want the best for your little ones. And their hopes and dreams deserve a plan. A child insurance plan can be a great step in this regard. However, if you’re thinking about the right time to buy a child insurance plan, then this is it. The earlier you start, the better your financial shield will be, thanks to the compounding effect.
Choose the right plan, consider factors like your goals, WOP, fund options, payout flexibility, and more. Start today, so you do not have to be anxious about your child’s tomorrow.
