Did you know? A child life insurance plan provides you with the dual benefit of investment and insurance. It safeguards the various milestones in their life by providing insurance coverage at all times. (Source)
Today, we live in a world that is filled with various uncertainties and events that can drastically affect the future of our children. There were so many families around that faced extreme challenges in critical times like the 2020 pandemic era.
And to fight these situations extensively, you need to look out for a strategically tailored child insurance policy. In this domain, you can generally look for the government’s best saving schemes, such as Sukanya Samriddhi Yojana, PPF, etc.
But how to opt for a sustainable plan that can be beneficial in every situation?
Well, don’t worry, this blog post aims to provide complete information about this segment to give readers complete clarity of concept.
Let’s begin!
Key takeaways
- Understanding various reasons to buy child insurance
- Addressing the description of the different types of options available
- Uncovering metrics in the selection of the best plans
- Discovering how it works and gets executed
- The end note
Reasons to Buy a Child Insurance Plan
Although the prime motive of buying a child insurance has to be ensuring future financial security, but other than that it also provides various perks like:
- It safeguards your life coverage.
- Due to catastrophes like parents’ death, the child receives a lump sum payment.
- It allows waiver of the premium amount, ensuring uninterrupted continuation of the plan.
- It offers the dual benefit of insurance & investment to achieve long-term financial growth.
- Ensures that the plan meets all future goals.
- In the absence of a parent, it will ensure the security of the child.
- It allows flexibility in adding the critical riders to the plan.
- It offers mental peace.
Intriguing Insights
Choosing a Child Education Plan could also result in additional tax savings under section 80E.
( tax-saving benefits)
Types of Child Plan
Provided are the types of child plans:
Traditional Child Plans
Child insurance plans offer a death benefit in the event of the policyholder’s death, which helps provide safety and financial security in case of an emergency. The remaining premium amount gets waived off along with the maturity benefits. These plans are best suited for parents who are looking for long-term financial security.
ULIP Child Plan
Parents all want the best education for their kids, which costs a lot of money. When it comes to securing your child’s future, a ULIP-based child plan is considered to be a great option, as it helps secure your child’s financial future. It helps meet future financial obligations, such as a child’s higher education, a child’s marriage, etc.
Considering the dual benefits of investments & insurance, ULIP can be a good option. The paid-in premium goes to the chosen funds, and the rest goes to life insurance. This plan also offers an option to switch between the funds & your changing requirements.
Intriguing Insights
This infographic shows the global market size of the child insurance sector and its future growth trajectory.
Factors to be considered while choosing a Child Insurance Plan
If you aim to buy the best child investment plan, you should keep in mind the following pointers to get financial security along with wealth creation.
Inflation & Education Costs
Factors such as inflation & education costs should be considered when considering a child insurance plan.
Premium Waiver Benefits
You might want to look into a plan that includes a waiver of premium feature. This will make sure that the premium is not due if the policyholder dies unexpectedly. This enables the child to continue receiving the benefits of the policy &have a secure financial future.
Liquidity & Riders
Some plans offer partial withdrawal, some offer a loan facility, &some plans come with income benefit facilities. This means that these facilities give you options and meet your financial needs.
Premium Payment Frequency
Check for flexibility in the premium payment frequency, i.e., choose a plan whose payment frequency aligns well with your paying capacity.
Regular Payout Option
Pick a plan with regular and periodic payouts to make sure you have enough money to cover the child’s milestones without any problems.
Associated Charges in the Policy
Look at the policy’s fees, like administrative fees, premium allocation fees, fund management fees, and so on. Consider a plan with low charges & one that well aligns with your objectives.
Terms & Conditions
Always review the policy’s terms & conditions to ensure there are no hidden charges or any surprises later on.
How Does a Child Insurance Plan Work?
Let us know the steps on how a child insurance plan works:
Choosing & Buying the Most Suited Plan
The initial step is to select a child plan for your child, which should be based on the financial objectives, coverage required, and premium paying capacity.
Regular Premium Payments
Pay the premium amount based on the agreed-upon mode, frequency, and length of time.
Investment
This plan offers dual benefits, i.e. a part of the premium is allocated towards life insurance coverage, & the other part is allocated towards investment.
Here, the corpus accumulated for maturity benefit grows.
Per the fund’s performance, the investment amount increases under this plan.
The guaranteed or non-guaranteed amount here becomes the maturity benefit.
ULIPs
The policy’s fund value here becomes the maturity benefit amount.
Death Benefit
The amount paid to the beneficiaries of the policyholder in case of their sudden demise is known as the death benefit.
Waiver of Premium
Get the premium amount waived after the parent dies so that the child can keep getting benefits for a better future and to reach their goals.
Flexibility
You can choose and switch between the funds in this plan based on your financial goals and level of comfort with risk.
Riders & Additional Benefits
To get additional coverage, riders can be added, such as accidental riders, critical illness riders, waiver of premium riders, etc.
Conclusion
Buying a child plan is crucial to ensure the availability of funds required to fulfil the children’s dreams. A comprehensive evaluation, comparison, and planning process is necessary to determine the most suitable plan. With a perfect balance between savings & protection, a secure future can be well built to fulfil dreams & future financial objectives.
Frequently Asked Questions
Ans: It provides dual benefits of investment and insurance by putting small deposits every month.
Ans: They help you save for your child’s financial goals such as higher education, marriage, starting a new venture, and more
Ans: Future policy benefits are the discounted sum of all future benefits paid out to customers who have bought insurance from the financial institution
