Why is It Important For Parents to Invest in the Child Plan?

Anyone who is a parent then a child is an integral part of their lives. Investing and saving for the bright future of the child is of extreme importance. When it comes to financial planning, building a wealth corpus for the child has to be on the list. Investing in the right child plan ensures that all the financial requirements are duly met so that the child need not compromise on the dreams and fly high even if the parent is not alive.

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Investing in your child's future:A wise decision & a loving choice
Benefits of Investing In Child Plan
Waiver of Premium Benefit
Future Premiums are paid by the insurer upon death of policyholder
Flexible Payout Options
Your premiums help your child achieve their dreams through lump sum or regular payouts
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Zero Commission
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Tax Benefits^
You get tax benefits under Section 80(C) and no tax on returns under Section 10 (10D)
Investment Flexibility
It offers the flexibility to invest at regular intervals or as a one-time contribution
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When it comes to securing the future of the child, the parents would surely do anything and give the wings to a child to rise high. However, the rising costs remain a matter of great concern. Inflation is taking a toll on each and everyone's power of purchasing. As parents, one might be worried about the educational expenses. Parents do want to provide the best education. In circumstances like these, the child plan plays the role.

What is a Child Plan?

A child insurance plan is important as it ensures that the child receives the best of everything even when the parent is not alive tomorrow. The key aspect of a child insurance plan is that it has an inbuilt premium waiver rider feature, which ensures that the plan will continue even after the parents are no more. The benefits will accrue, which is payable and can be utilized for the bright future of the child.

The best way to save is to make a regular investment for the child's future. Besides, partial withdrawal is permitted under the plan and tax benefits can be availed for the child insurance premium paid.

Understanding the Types of Child Insurance Plans

The following are the types of child insurance plans:

  1. Child ULIPs

    With this type of plan, the premium that is paid by the insurer will flow into the collective pool funds, which are invested in equity and debt instruments. It carries risk with them that gets even out when planning for the long-term. The potential return is high as this product is market-linked. This type of plan is suitable for a long-term policy of more than 10 years.

  2. Child Endowment Plan

    With this type of plan, the premium paid by an insurer simply flows into the collective pool of funds, which is invested in debt products only. The returns potentially are not high and this plan is suitable for the short-term policy, which is less than 10 years. 

How to Choose the Child Insurance Plan?

In most cases, it is found that the parents begin planning the future of the child somewhat late. To obtain the maximum benefits of the insurance planning, it is highly recommended to start planning for the future of the child in the formative years that will ensure enough funds accessing then when the child is truly ready to embark on the path of career.

Believe it or not! There is no such way to choose the right child plan. The right child plan is the one that fulfils the needs and requirements and helps the child when required.

The premium paid for the child plan is entitled to tax deduction under Section 80C of the IT Act. An individual can claim the deduction from the taxable income for the same. The deduction is up to Rs 1.5 lakh per year. Moreover, an income from this plan remains tax-free under Section 10(10D). With the child plan in place, a loan for higher education can be taken. Under Section 80E, the interest paid on the loan will also be tax-deductible.

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

Handy Tips 2021 to Buy the Child Plan

The planning for the future of the child is an important decision. Listed below are some tips that would help to make an informed and wise decision:

  1. Know the Objectives

    The first step for any investment is planning. Therefore, as parents, they should understand the amount that would be required for the child's growing year to accomplish important milestones such as education, marriage, and so forth. Another key factor that needs to be taken into account is the inflation rate and the effect it has on the investment. Conduct thorough research before choosing the child plan.

  2. Child Plan that Has Premium Waiver Benefits

    When it comes to buying the child plan make sure that it has the benefit of waiver of premium. Upon the demise of the parent, the insurance company will waive all the premiums and will continue to fund the policy. This ensures the maturity benefits, which was set for the specific age.

  3. The Product and Cost

    Before the purchase decision is made, it is important to understand the product thoroughly. Before signing below those dotted lines, make sure there is complete understanding and clarification with every terms and condition mentioned in the policy document. Read and re-read the conditions and the product brochure carefully. Moreover, the insurance provider levies certain charges that also need to be paid. So, choose the insurance company wisely and buy the child plan online comparing all the features, benefits and quotes offered.

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Wrapping it Up

Child plans are surely an ideal way to secure the future of the child. As the inflation rates are going high, as parents it is their responsibility to properly plan the future of the child. Include a child plan in the financial portfolio.

In the times we are living in today, savings and protection are equally important to safeguard the future of a family. With the right child insurance plan in place, lead a comfortable life without worrying about the future of the child as it is going to be certainly bright.

*All savings are provided by the insurer as per the IRDAI approved insurance plan.
*Tax benefit is subject to changes in tax laws. Standard T&C Apply
^The tax benefits under Section 80C allow a deduction of up to ₹1.5 lakhs from the taxable income per year and 10(10D) tax benefits are for investments made up to ₹2.5 Lakhs/ year for policies bought after 1 Feb 2021. Tax benefits and savings are subject to changes in tax laws.
#The lumpsum benefit is calculated if policyholder invested ₹10000 monthly for 10 years in the fund with a policy term of 20 years. This Point To Point past performance data of last 10 years has been used to illustrate a scenario for the customers benefit. It is assumed that the past 10 years returns would have also been delivered in last 20 years. This is not guaranteed and not in anyway indicative of what the customer may actually get 20 years from now. The investment is subject to market risk and the risk is borne by the policyholder.
+Returns Since Inception of LIC Growth Fund
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^^The information relating to mutual funds presented in this article is for educational purpose only and is not meant for sale. Investment is subject to market risks and the risk is borne by the investor. Please consult your financial advisor before planning your investments.

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