How to Decide Which Plan Suits My Child Education

Introduction 

A child is a blessing and a bundle of happiness. Parents give their child the best possible care and love when he/she is an infant, send them to the best schools and colleges for achieving their goals. 

Nowadays, thinking of a better future for your child involves a lot of expenses such as school fees, college fees, coaching, stationary, etc. If you want your daughter/son to have a successful career, then financial planning for your child’s education is a requirement. So how do you strategize your child’s education? What plans help in your child’s bright career? Investment is the answer to all your questions. Do you Invest? If no. Then start investing in your child’s security. Investment might help you in creating a structure that provides support to your child’s future expenses. But what if you are not there with your child? How would he/she be going to manage all the expenses? So, let’s study this in detail: 

Child Insurance Plan 

With the availability of several insurance products and services for proper financial planning, one such plan that focuses mainly on your child is the child education plan. It combines insurance and investment where the premiums paid by the policyholder are invested and the maturity benefit can also be availed after the policy term ends. All the payouts can be used for your child’s education or other future liabilities. In case of premature death of the parent, the child plan offers a death benefit to the child against the uncertainties of life. Various insurance companies offer an option to pay premiums for a specified period such as monthly, half-yearly, yearly, or single pay. 

How To Decide Which Plan Suits My Child’s Education 

Roopak, a 35-year-old IT employee has a monthly salary of Rs. 1 lakh. He has been financially burdened with a home loan of Rs 20,000 per month and his monthly expenses are around Rs. 50,000. Ashish has been saving money for the last few years for his 5-year-old daughter’s higher education. He is confused about how to go about it. 

There are several child insurances plans available in the market but the main concern of Roopak is what plan to choose? And how to choose? All plans offer amazing benefits and features. The selection of the plan depends on the buyer’s requirements. We have made your selection easy by listing out some points to keep in mind when deciding to buy a plan for your child’s higher education. Let’s have a look: 

1. Calculate The Approximate Costs 

   It is very important to calculate the probable costs and planning required for your child’s better future. Before investing in an education plan, always estimate the costs and decide a target amount. 

2. Start Investing Early 

   Earlier the investment, better the future of your child. Most of the policies start providing the maturity benefit when your child reaches college or crosses 18 years. Investing early in a plan is a smart decision for the financial security of your child. For example, it is better to invest in a plan when your child is born than investing when the child crosses 12 years. Because in the latter case when your child is 12 years of age, the maturity amount will get late by the time he/she reaches college. 

3. The Right Time To Buy A Child Education Plan 

   The right time to buy a child education plan is as early as possible. It is advisable to gift a child an insurance plan when he/she turns 1. Nothing can be as precious as your child’s security and protection on his/her first birthday. 

4. Understand The Market 

   A child plan is a long-term commitment. So always consider some parameters such as inflation, rising costs of education, etc to understand the market before buying a child insurance plan. This will help you to calculate the actual cost of investment required for your child’s future. 

5. Check The Features Of The Plan 

   Always check the features and benefits of the child insurance plan you wish to avail. Does it include riders or a partial withdrawal clause? Various Child insurance plan offer riders in three categories: premium waiver, critical illness, and accidental death and disability. Critical illness rider offers the coverage for a pre-existed illness, while the accidental death and disability riders pay an extra sum assured in case of an unfortunate incident that results in policyholder’s death or disability. Partial withdrawal is also an important criterion to be considered while choosing a child education plan. It allows the assured to make a partial withdrawal in cases of emergencies. 

Does Your Plan Offer A Premium Waiver Benefit? 

Always go for a child education plan that includes a premium waiver benefit, either under the policy or as an add-on benefit. Premium waiver benefit is a benefit where the future premium payments are waived off by the insurer in case the parent passes away. The child receives the death benefit as promised by the insurer and won’t have to pay any premiums after that. A child is also eligible to get the maturity benefit once the maturity date is reached. All the remaining due premiums will be paid by the insurance company. 

1. Avail Equity-Linked Plans In Case Of Risk Appetite 

   In the case of child ULIP plans, it allows a portion of your premiums is to be invested in financial securities, such as equity and debt funds. If you are thinking for a longer period, equities offer good returns but they are quite risky at the same time. So, if you are ready to take a risk when investing for your child’s future, an equity-linked plan is the smart decision for your child. 

2. Buy Endowment Plan In Case Of Low-Risk Appetite 

   Child plans come in two forms: ULIP plans and endowment plans. We have discussed ULIP plans in the above section. Endowment plans are considered in cases if you are more troubled about the stability of your investment. In this plan, a lump sum amount is paid by an insurer after a specific term i.e., on maturity or death of the assured.

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Wrapping It Up 

Keeping the above tips in mind, choose the right child insurance plan that suits you and your children’s requirements. Go through the plan’s features, benefits, coverages carefully and choose your plan wisely.