Why NRI's Must Invest in Child Plans in India for Best Returns

Currently, India is the fastest-growing economy as it has seen massive economic growth in the past two decades. All this has made India a favorite investment destination for the resident and Non-Resident Indians. Growing NRI investments in India have also positively impacted the country's Foreign Direct Investment (FDI). NRIs can invest in India and earn greater returns to meet their financial goals effectively.

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Best Child Saving Plans
  • Insurer pays your premiums in your absence

  • Invest ₹10k/month and your child gets ₹1 Cr tax free*

  • Save upto ₹46,800 in tax under Section 80(C)

*All savings are provided by the insurer as per the IRDAI approved insurance plan. Standard T&C Apply

Nothing Is More Important Than Securing Your Child's Future

Invest ₹10k/month your child will get ₹1 Cr Tax Free*

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One such goal is creating a financially secure future for your child. The more you invest today, the better the future will be for your child. Investing in child plans can help you secure their future needs and requirements to the fullest.

What are Child Plans? 

A child plan is a combination of insurance and investment under one roof. The insurance part helps you protect your child against any unforeseen event, such as your untimely demise. It ensures that your child receives a fixed annual payment from your insurer, as per the terms and conditions of your policy.

On the other hand, the investment component helps in fund accumulation through investment in various financial instruments. These instruments include equities, debt bonds, etc.

The child investment plans are divided into the following two categories:

  1. Child Endowment Plans:

    The amount paid by the investor in the form of premium is invested in debt instruments selected by the company. You need to decide the payment mode in which you will pay your premiums. You can choose between a lump sum or a regular payment option.  These plans have the benefit of less risk, which means the investments are not subject to market fluctuations and are a safe bet. 

  2. Child ULIPs:

    The amount you pay as a premium is invested majorly in equity instruments. A small portion is invested in debt funds. Unlike the endowment plans, you have the freedom to select investment instruments.  You can choose between regular or lump-sum premium payment modes.  ULIPs are also called market-linked plans and help attain wealth accumulation, systematic savings, liquidity, and flexibility all at once.  

    Disclaimer: All savings are provided by the insurer as per the IRDAI approved insurance plan. Standard T&C applies.

What are the Advantages of Investing in a Child Plan?

A child plan offers the following advantages: 

  1. As a Collateral Security:

    If you plan to avail a loan for your child's education, a child policy can act as collateral for the same. Thereby eliminating the need to possess any other collateral.

  2. As a Financial Support in your Absence:

    A child plan can support your child's needs in case of your unfortunate demise. After your death, the plan can help your child attain the ease of maintaining regular expenditure and support future dreams and aspirations.

  3. Medical Expenditure of your Children:

    Several child plans are there to secure your child's future along with providing coverage for medical requirements. This becomes essential if you have a history of family diseases or anticipated health risks.

  4. Education of the Child:

    The normal school education cost is around Rs 2 Lakhs. Eventually, this expenditure is bound to increase with rising inflation. Child plans can help you accumulate the amount you require to set apart for your child's higher education.

    Disclaimer: All savings are provided by the insurer as per the IRDAI approved insurance plan. Standard T&C apply.

Why Must NRI's Invest in Child Plans in India for Best Returns? 

The following features of child plans make them highly feasible for an NRI: 

  1. Tax Benefits:

    The maturity proceeds are generally exempted from tax under Section 10(10D) of the Income Tax Act, 1961. You can also use the premiums paid for availing a deduction under Section 80C of the act up to Rs 1.5 Lakhs.

    Disclaimer: Tax benefit is subject to changes in tax laws.

  2. The Availability of Riders:

    Riders are the additional benefits provided over and above the basic benefits of the policy. You have to pay a higher premium for availing of the rider benefits. Accidental benefit, critical illness benefit, etc., are some of the rider options available.

  3. Premium Payment Options:

    You have the freedom to select the premium payment mode at your convenience. You can choose between paying your premium as a single payment or you can choose the option of limited period payments.

  4. Flexible Payout Options:

    The fund invested by you is required at various stages, such as for your child's higher education or marriage. The child plans provide the benefit and ease of withdrawal at different stages as per your needs.

  5. Financial Security:

    Child plans offer substantial financial security to your child after you pass away. The life cover amount is paid in a lump sum, future premium payments are waived, and income protection is provided to the child. 

    Under ULIP based child plan, you can opt for the equity fund option to achieve optimum benefits over the long term. The return under this case can vary between 14 to 18 percent. Systematic withdrawals can be made to ensure the fund flow at the desired milestones. 

Some Child Plans in India for NRIs

Some child plans available in India in which NRIs can invest include:

  1. HDFC Click 2 Wealth:

    1% of the annualized premium is added to your fund value for the first 5 years. The policy can be easily availed even when your child is as young as 30 days old.

  2. HDFC Life YoungStar Udaan:

    Lump Sum payout of up to 140% of the sum assured and additional bonuses are paid on maturity. There are 3 payout options that have been designed to suit your child's various goals. These include the career, academia, and aspiration option.

  3. HDFC SL Young Star Super Premium:

    You have the option to choose between Save and Save-n-gain benefits. The funds can be withdrawn after 5 years of purchasing your policy.

  4. ICICI Prudential Smart Kid Solution:

    You can get life cover and premium waiver benefits to secure your child's future. Choose from equity, debt, and balanced funds to get better returns. You are also rewarded with loyalty additions and wealth boosters.

  5. LIC's Children Money Back Plan:

    The plan can provide regular savings with greater returns. When your child reaches the age of 18, 22, and 24, 20% of the amount is paid back as a survival benefit. It comes with several other benefits like death benefit, maturity benefit, and participation in profit benefit.

  6. Max Life Future Genius Education Plan:

    The plan provides financial security, guaranteed money-backs, the flexibility to invest, bonus options, and tax benefits. 

  7. Max Life Shiksha Plus Super:

    It protects your family along with the continuance of the policy post your death. The policy term can range from 10 Years to 15 or 25 years. The policy also provides 6 fund options to invest in government securities, corporate bonds, money market, and cash instruments.

  8. SBI Smart Champ Insurance Plan:

    It is a participating life insurance plan. Smart benefits are payable in four equal installments after your child turns 18 years of age.

    Disclaimer: Policybazaar does not endorse, rate, or recommend any particular insurer or insurance product offered by an insurer.    

What Are the Factors NRI's Must Consider While Investing in Child Plans in India?

A Non-Resident Indian must take care of the following factors while investing in child plans in India:

  1. Investments should be systematic:

    Plan your investment portfolio well in advance. List down the child's needs, analyze your financial ability and the time available for investment. Calculate the premium you wish to pay and the maturity benefit you aim to receive based on your requirements. 

  2. Goals should be financially mapped:

    Your child has a variety of needs, from higher education to marriage or setting up their venture. Pre-decide the amount that you shall require for each of these expenses on a definitive basis. Calculate the expected inflation and currency depreciation over time to create an investment plan that shall not fall short. 

  3. Insurance:

    The insurance component can protect your child from unforeseen risks. It ensures that your children are not in debt in case of loss of income due to any cause. 

  4. Where to Invest:

    The most important decision to make is where to invest the savings to achieve maximum returns. Several insurers provide child plans for you to choose from. You must select an insurer who can cater to your specific requirements.

  5. Claim Settlement Ratio:

    It should be a crucial factor while investing in child plans. The ratio indicates all the claims applied and settled or actually granted by the insurer. Higher the ratio, the better the insurance provider is. 

  6. The premium amount:

    Research and compare the premium amount payable across all the available policies and select the one that suits your budget.

  7. The add-on benefits provided:

    The insurers provide additional benefits apart from the basic features of the plan. Acquaint yourself with the ones that your policy provides and take advantage of the same.

  8. The terms and conditions of the plan:

    Different insurance providers incorporate different terms that should be read and understood before proceeding with the plan. It is best to avoid policies with complex conditions associated with them.

  9. The policy term:

    Securing your child's future for as long as feasible is important. At the same time, the longest policy can provide low premium rates. Therefore, policy term is a crucial factor that you must consider.

  10. The coverage amount:

    The coverage is subjective of several factors such as the income earned, insured's age, etc. Analyze everything and then choose a plan that promises to meet your maximum requirements.

In Conclusion

It is a parent's responsibility to find the building blocks of the dream your child envisions. Compromising on education or marriage can be best avoided by planning finances well in advance. Child plans are a great way to build a substantial corpus for your child's future goals. With several insurers providing such plans, even NRIs have sufficient options to choose their investment destination in India.

FAQ's

  • Q. What are the features of a child plan? 

    A. The child plan has the following features: 
    • Advantage of Partial Withdrawal: After 5 years, the amount can be withdrawn for paying college fees or on account of marriage or illness.
    • Premium Waiver: In case of unforeseen demise of the parent, the child is entitled to receive regular payments from the maturity amount, and the lump sum is paid on maturity. The future premiums are waived off, the company pays the premium on your behalf, and the policy does not lapse until maturity.
    • Maturity Amount: Depending upon your requirements, the amount can be withdrawn after 5 years to meet educational, medical, or marriage expenses. Else, the maturity amount is received at the death of the parents or the end of the policy term. 
    • The policy Term: The term selected will depend on your child's age and the amount of money required.
    • Mode of Premium Payment: You can select the mode of payment as per your convenience – single lump sum, regular: annual, quarterly, or half-yearly.     
  • Q. How do Child plans work? 

    A. Here is how a child plan works:
    • Decide on the policy amount that you require. 
    • Choose between Child Plan ULIPS and Child Endowment plans. 
    • Decide on the mode of payment – lump sum or regular.   
    • Receive maturity amount at the end of the term. 
  • Q. What are the documents required for a child policy? 

    A. The documents required include:
    • Proof of Age: Birth certificate, mark sheets, or passport. 
    • Proof of Identity: An Aadhaar card, Passport, PAN Card, or Voter Id.  
    • Proof of Income: Income Tax Return, Form 16 of the Policy buyer.  
    • Proof of Address: Telephone bill, electricity bill, ration card, passport, or driving license.
    • Duly filled Proposal Form.
  • Q. How much should you invest in a child Plan?

    A. The average amount spent on education today varies from approximately 2 lakhs to 15 Lakhs. By the next ten years, the amount would go up to 50 lakhs or so. To cover the same, you need to invest a minimum of Rs. 10,000 per month for the next 5 years approximately.
  • Q. What are the documents required for the claim process? 

    A. You have to submit the following documents for claiming your child plan: 
    • Policy Documents
    • Medical Certificate
    • Death Certificate
    • Filed Claim form 
    • Medical reports and bills
    • FIR Copy
    • Account details
    • KYC of the nominee
    • KYC of the insured

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