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Choosing The Best Insurance Policy For Child Education

By Author: Rajesh Thombre
Total Articles: 1

What is an Insurance Policy for Child Education?

Insurance Policy for Child Education or Child Plans enable parents to prepare and secure their child’s future against all eventualities, including an uncertain death of the policyholder. These plans are issued under a parent’s name who is the policyholder. The child for whom the plan is opted for is registered as the insured.

In case of an untimely death of the policyholder before the child plan reaches its maturity, the death benefit becomes payable to the nominee. Death Benefit refers to the total of the sum assured and the accrued bonuses, if any. An effective child plan offers a premium waiver benefit in which all future premium payments are waived off by the insurer. The plan does not get terminated and continues till the end of the pre-determined maturity period.

Child plans aim to help families overcome the financial instability caused due to the death of the policyholder, and prevents the child’s future from becoming bleak. It secures the child financially and provides for his/her basic needs, even in the absence of the policyholder.

Benefits of Insurance Policy for Child Education
The following are the benefits of investing in a good child plan:
Financial planning for your child’s future: The primary factor behind an insurance policy for child education is that it enables you to financially plan for your child’s education, marriage and/or other requirements well in advance.

Ensures financial security: Following a thought-out financial plan assures the child of a financially stable future, enabling you to provide for his/her multiple needs.

Tax exemptions: While you plan your child’s future, an insurance policy for child education enables you to avail tax deduction on the premium under Section 80C of the Income Tax Act, 1961. Not just that, such Child plan benefits paid are also tax-free under Section 10 (10) D of the Income Tax Act, 1961.

Add-on facilities or riders: An efficient insurance policy for child education includes add-on benefits like critical illness benefit, accidental death benefit, etc. on additional payment over and above the premium amount.
Liquidity: Good ULIP child plans offer you the flexibility of liquidising your capital investment through partial withdrawals.
Choosing Policy Insurance Policy for Child Education
Factors to consider while selecting the best insurance policy for Child Education:

Monthly income and savings

Take into consideration your monthly income, expenditure and other investments that you have already committed to. This will help you to get a clear idea about the amount you can afford to pay towards the premium of your child plan. Remember that it is not a one-time payment and that you have to pay the premium every month, the inability of which would lead to the lapsing of the child plan. In case you skip a payment, policy terminates due to lapsation. In such a case, you will neither be able to retrieve the amount that you have already invested nor will you be entitled to any benefits offered by your chosen child plan.

Premium waiver benefit

It is highly recommended that you invest in a child plan that includes a premium waiver benefit. In case of your unforeseen death during the policy tenure, this feature will make your child eligible for wave-offs on all future premiums while the policy continues till maturity. This will offer your child the opportunity to a quality life and fulfil his/her financial needs even when you are not around.
Opt for a Unit-Linked Insurance Plan (ULIP)

Opt for an Ulip over a regular child plan. Such plans are integrated with the benefits of a traditional life insurance such as maturity and death benefits, while investing a certain percentage of your invested capital in the mutual funds of your choice. Besides, a ULIP offers you the advantage of spending your savings periodically and, at the same time, extending a life insurance cover in case of unpredictable eventualities. It is an effective blend of insurance and investment.

Prepare for uncertain educational plans

The educational expenditure of your child cannot be predicted in advance. The expenses depend on the type and number of educational courses he/she will undertake, the type and location of institutes and several other parameters. Therefore, it is best to arrange for an adequate cover rather than falling short of the necessary expenses.
Consider other variable factors

Returns on your child plan investment depends on various factors like market conditions, government policies, inflation rates, etc. This is because these factors determine the purchasing power of your invested premium. If you are not a seasoned investor, it is advisable that you hire a professional financial advisor to guide you with child plans that best suits your financial objectives.

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