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Should Parents Invest in a Child Insurance Plan?

For any parents, their child is the most important part of life. Believe it or not, even if you are not a parent now, the day you enter the phase of parenthood, surely the child will become the axis of your world.

As a parent, you want everything best for the overall development of the child. While maintaining a steady balance between practical and emotional aspects of life it is indeed a challenge to manage both savings and spending.

So to ensure the happiness of the child and secure the future financially it is advisable to choose the right child insurance plan. The child insurance plans can be customized depending upon the future needs of the child even if you are not around.

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What Does Child Insurance Plan Mean?

The child insurance plan is the apt amalgamation of investment and insurance, which ensures the secured future of your bundle of joy. At the end of the policy period, the life cover is accessible.

The child insurance plans offer flexible payout at every important milestone of the child such as higher education, marriage, and so forth.  Any uneventful incident can occur at any point in time and surely does not knock on the door with any prior information. Therefore, as a parent, it becomes your responsibility to shield the bright future of the child and help them financially to successfully achieve their goals.

What Makes a Child Insurance Plan Stand Out?

Now, that you know that the child plans are the insurance cum investment plan, which enables you to create a wealth corpus for the future of the child over the policy term. When the child plan matures, then a lump sum amount will be received that will be used to pay the expenses related to the child such as the college fees, etc. The insurance cover in a child plan is ten times the sum of the premium paid.

Under any uneventful incident wherein the policyholder passes away during the policy period, the child will receive the lump sum amount as the death benefit that is promised when buying the child plan. The unique point of a child plan is that the future premiums will be paid by the insurance provider and the maturity benefits towards the end of the policy tenure are also likewise paid to the respective child. The child insurance plan provides monthly income adding to a death benefit to meet the everyday expenses. Henceforth, the child plan should be the prime part of the financial planning of the future of the child.

Briefly Understanding:  Child Plans

Take a look below to understanding the child plans in India:

Savings Plan

The savings plan does not require you to invest in a market. Within this plan, you pay the premiums regularly or for a limited period and towards the end of the policy period you will receive guaranteed payouts each year. Moreover, you will also obtain an accrued bonus, if any.

Investment Plans

The investment plans let you invest in the debt or equity market. With this plan, you pay the premiums regularly or for a limited period, which is then invested in instruments of equity and debt.  As it is market-linked, so such plans generate good returns over the long policy term. On the premise of the financial risk appetite, you can easily choose the fund options with differing degrees of risk that is the equity-debt allocation.

Why Should You Buy the Child Insurance Plan?

Any parent in this world always keenly aspires to fulfil every dream of the child. Besides, as parents, you also start saving for the better tomorrow of the child.

Moreover, the right child insurance plan will not only help you to create an enormous corpus for the child but also secure the future of the child even if you are not around. A child plan is ideal for those parents who wish to work towards these objectives and minimize the risk factor as well. Listed below are some of the key benefits of a child plan:

Partial Withdrawal

When the child gets hospitalized due to a severe accident or because of some other medical reasons then a child plan permits to withdraw the lump sum amount from the policy that is yet to be. This sort of pay-out will then act as the add-on to the health insurance plan.

Use as Collateral

In case you plan to take an education loan for the child then you can easily use a child plan as the collateral.

Tax Benefit

With the prevailing tax law premiums that are paid towards a child insurance plan is exempted within Section 80C. Likewise, the maturity benefits of the child plan also remain exempted as per Section 10 (10D).

Note: The tax laws are subject change to change as per the prevailing laws.

When is the Ideal Time to Buy the Child Plan?

With the rising cost of almost everything specifically in the education sector, sound financial planning is important so that you can bring your child to the healthiest environment. The child insurance plan safeguards the future of the child and likewise also inculcates the habit of disciplined savings.

For instance, when you invest a sum of Rs 5,000 a month for twenty years then the corpus at the rate of 8 per cent returns might grow up to a sum of Rs 28,45,000. On the other hand, in case you delay the plan by even five years then you need to invest a sum of Rs 8,500 every month for fifteen years to reach the equivalent corpus. This implies that the delay of five years means will cost you an extra investment of the sum of Rs 3, 30,000.

Therefore, the ideal time to buy the child insurance plan is as early as possible. The parents can buy the plan for the child plan is as young as fourteen days with the varying policy term from fifteen to twenty-five years.

Wrapping It Up

Buy the right child plan for the brightest future of the child. The early you buy, the better it will be as it will give wings to the dreams of the child. This will enable them to rise high and fly even higher.

Happy investing for the child!

Written By: PolicyBazaar - Updated: 13 May 2021
Disclaimer: Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by an insurer.
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