Everything that You Should Know- Child Insurance Plan

From sending your child to the school, university and buying other essential commodities, finance is always involved. Therefore financial planning for the future of the child is of utmost importance and should be considered by every parent.

Wondering how to go about with planning the bright future of the child? Well, you need to invest in the right child insurance plan that will help you to generate wealth corpus and help the child to manage future expenses even when you are not around.

Yes, you read it right. The benefits of a child plan will not leave your child in stress and help the child to achieve his desires and goals.

What are the Features of Child Insurance Plans?

Listed below are some of the key features of child insurance plans:

One of the key benefits of a child insurance plan is that it provides a safety net in case of any financial implication at any important stage of life. The child plan is available in both non-linked and linked varieties.

Let us have a quick understanding of the listed below features of a child insurance plan:

• Choice of Funds: A child insurance plan, for instance, a Unit Linked Insurance Plan permits the policyholder to choose the investment funds like a hybrid, debt, equity and money market. Besides, you also have an alternative of dynamic fund allocation and systematic transfer plan.

• Policy Tenure: The ideal time to avail the plan is up to the age of 18 years to 21 years. The term can be selected from the birth of the child until the child reaches a certain age to avail the benefits of a child plan. At the time of maturity, the policyholder need not be more than 70 years of age preferably. However, this may vary from insurer to insurer.

• Sum Assured: This is the sum that is paid when the policyholder is no more. Ideally, the sum assured should be 10 times the present gross income of the insured.

• Maturity: When it comes to choosing the maturity sum then it should be decided thinking about the future. Let us just assume that the child is eight years age and the child plan will mature in ten years time. So consider the factors such as interest rate and inflation likewise. In case you think these factors are not that important then you might fall short of the necessities in the coming times. Possibly the single premium plans do not provide features and benefits, therefore read the policy documents carefully before making the final decision.

• Premium: At the initiation of the child insurance plan it becomes payable as one lump sum. You can also select to pay it constantly or for a limited time. Mostly the insurance companies in India provide options such as annually, monthly, half-yearly or quarterly. The child insurance premium will differ as per the sum assured in case if a traditional child plan is bought.

• The Clause of Partial Withdrawal: The clause of partial withdrawal permits the policyholder to make the withdrawal partially in case of any financial emergency. Some policies come up with an alternative of partial liquidity.

• Segmented Pay-outs: With a child plan you can easily choose whether the child will get the payments in a lump sum or annual instalments. This sort of setting will help the child to manage the expenses accordingly.

What are the Benefits of a Child Insurance Plan?

Now let us quickly have a look at the following benefits of a child plan:

• Option to choose either an endowment plan or a unit-linked insurance plan.

• The flexibility of periodic premium payment alternatives.

• The flexibility of disbursing the funds upon demise or maturity.

• You can also avail secured loans against the child plan.

• The funds accessible on the demise of the insured before the maturity or if the plan has reached the maturity.

• The tax benefits within different sections of the Income Tax Act.

How Important is a Child Insurance Plan?

The ideal time to buy a child plan is as early as possible. The following pointers will help you to understand the importance of a child plan:

• Secured Future: Even if the parent passes way untimely the child plan will continue and pay the maturity benefits discussed in the policy. Buying a child plan ensures that even if the parent is not there tomorrow it will pay the benefit upon maturity and the financial future of the child is secured. The benefit can be used to fund the education of the child, marriage and so forth.

• Disciplined Savings: The Unit Linked Insurance Plan for the child permits the policyholder to initiate disciplined savings and helps to meet the future life objectives of the child. A premium payment monthly in the plan provides the equivalent rupee cost averaging advantage that the systematic investment plan also provides within the mutual fund scheme. Consistent and disciplined savings will provide the best returns that will enable your child to meet every financial requirement.

• Creating a Corpus: The child plan helps to create an enormous wealth corpus for the bright future of the child. It provides coverage in case of premature demise and also shields the financial future of the apple of your eyes so that your child need not feel left out or alone.

Child Savings Plan vs Sukanya Samriddhi Yojana Scheme and Public Provident Fund

The Bottom Line

Give wings to your child and buy a child plan that helps to achieve the objectives and come out with flying colours of success, joy and pride.

The life of parents is always full of responsibilities and duties. Invest in the best child insurance plan and have peace of mind that even if tomorrow you are not around every need of the child will always be taken care of.