Useful Tips to Buy a Child Plan
Planning is a wise thing to do before welcoming a new addition to the family. As parents it is a must to secure the future of the child by investing right! Child plans arethe simplest manner by which to avert financial pressure in the future. In this way, you can ensure that your child's needs are taken care of, even if you are not around.
Most insurance companies nowadays have child plans in their list of offerings. Some of these plans are market-linked policies and allow the policyholder to invest in both debt and equities, while the others are traditional plans that invest your premiums only in debt. Child plans offer greater returns than PPF or FDs, but to choose a suitable plan as per your child’s need is a tricky task.
Here is a list of a few quick tips that can help you choose the best child plan:
1.Consider the rising cost and the changing needs
Deciding the right amount of sum assured is the most important point while buying a child plan. You need to understand the changing needs of the new generation and consider inflation before deciding a suitable sum assured. All that you are saving for your child would be used in future; what costs Rs. 100 today might cost Rs. 500 when your child needs it. For a better visionabout the returns and premiums of plans, you can also compare plans on Policybazaar.com. For example, if a 40-year old buys a plan for his 7-year old child, then he would have to pay Rs. 4810 p.m., for his child to get Rs. 24 lacs on turning 27.
2.Go through the policy documents carefully
To prevent issues from arising in future you should read the fine print carefullybefore investing in a child plan. All plans come with some advantage or the other and to understand thefeatures of the plan in detail it is essential to go through the policy documents. To ensure an efficient and timely claim settlement process, it is important to check for all the important dates and timelines. The motive behind buying a child planis to cater to your child’s needs even in your absence, whereas, one hidden clause can leave your child helpless at the time when he would require it the most.
3. Look for Waiver of Premium Rider
Some insurers offer Waiver of Premium Rider or self-funding of premium in case of death of the applicant during the tenure of the child plan. This keeps the policy continued without the need of any other family member having to pay the premiums. On the demise of the policyholder, a child insurance plan pays a lump-sum amount to the nominee and the policy continues. All the due premiums thereafter are waived off and the insurance company continues to invest the premium money on policyholder’s behalf. This option will save the policy from getting lapsed and also the child would get complete maturity benefit.
4. Check for Partial Withdrawals
Some plans allow partial withdrawal of the maturity amount in pre-decided chunks and on pre-fixed intervals. The idea behind allowing partial withdrawals instead of paying the lump sum amount at once is to help the parents meet the financial needs of their child at the key moments in his life, such as admissions in educational institutes, medical emergencies, etc. Therefore, it is wise to opt for plans that allow partial withdrawal of funds. This option gives you the flexibility of meeting unplanned expenses in case of emergencies. This facility works as a financial support in case of eventualities.
Click Here to know why is having a child plan important.
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