One of the most important things to think about while planning for your child’s future is how to make sure they are financially stable. As a parent, you want to make sure your kids have every opportunity in life, from a good education to keeping them protected from unexpected events that may damage their financial well-being. One of the ways to protect them is to have a child insurance plan by your side.
What Are Child Insurance Plans?
Child Insurance Plans are distinctive insurance policies that help pay for expenses that your children may need in the future, such as school and other important life events. These plans often combine insurance benefits with savings, making sure that a child’s financial needs are fulfilled even in the most terrible circumstances. Child Insurance Plans help parents build an education fund, thus acting like a child education plan, save for future expenses, and provide benefits in case of emergencies. These plans are usually set up so that you’ll receive money at crucial moments in your child’s life, making sure that you have money when they need it the most.
Two Types of Child Education Insurance Plans
In India, there are many different kinds of insurance coverage for children. Buying a child education plan can help you in meeting the financial milestones that you have set for your children. To help you out, below are the two types of child insurance plans that are available:
1. Child ULIPS: A ULIP, or Unit Linked Life Insurance Plan, is an insurance policy that also works as an investment. Part of your money goes towards protecting your child, much like a typical child education insurance plan. The remaining amount will be used in the market to be funded in a mix of equity and debt.
2. Child Savings Plans: The Child Savings Plan lets the policyholder fund the plan externally from any market. It is a multi-faceted plan that gives life cover, maturity benefit, and tax benefits, all in a single policy.
Why is it important to invest in Child Insurance Plans?
1. Helps you fund your children’s education: With the expense of college going up, it’s important to have a significant amount of money saved up. One of the best aspects of a child education plan is that it lets you set up an education fund. These plans aim to accumulate funds over time so that when your child is ready for college, there will be enough money for their education. The returns on these Child savings plan are generally better than those on regular savings accounts or fixed deposits.
Child Insurance Plans are different from other types of investments because they promise a set amount of money at maturity. This is an excellent way to save for a child’s education since it makes sure the money is always there, so you don’t have to worry about loan or financial issues later.
2. Health Emergencies: Life is full of unexpected events, and medical emergencies can happen at any time. Most child insurance plans cover health care, so families don’t have to worry about funds during these difficult circumstances. You won’t have to worry about the expenses if your child needs medical care in an emergency.
3. Guaranteed Returns: Many child savings plan promise returns at the end of the policy term. This feature gives parents a safety net when it comes to managing their money, which is especially important when they are going through big life transitions like going to college or buying a home. Child Insurance Plans usually offer consistency and predictability in returns, unlike stocks, which might change. With this type of insurance plan, the money you put in will increase over time and will be available when you need it most. With Child Insurance Plans, you may be confident about the security of assured growth. This is especially crucial if you’re saving for a child’s education or other long-term ambitions.
4. Being able to change: Child Insurance Plans offer a lot of flexibility. These plans let you pick the payment options and policy terms that work best for your budget. You can choose to pay your premiums in full or in installments, depending on what works best for your budget. Some Child Insurance Plans also let you customize the coverage, so you may make the plan fit your needs and wants.
5. Loan Against Policy: When parents need money immediately, many child insurance plans let them borrow against the coverage. This feature lets you have access to your money right away without having to sell the whole insurance. If you’re short on cash, you can borrow money against the policy’s accrued value without giving up the plan or ceasing its growth.
6. Tax Benefit: Child Insurance Plans have tax benefits that can help you reduce your tax liability. Section 80C of the Income Tax Act states that the premiums you pay for Child Insurance Plans are eligible for deductions. This can help parents save money and reduce the financial burden on parents. These tax benefits can add up to significant savings, which makes Child Insurance Plans a good investment choice. Under Section 10(10D) of the Income Tax Act, the maturity benefits you get are tax-free. This lowers the tax burden and increases the effective returns on investment, which makes it a smart financial choice.
7. Maturity Benefits: Child Insurance Plans offer maturity benefits at the end of the policy term that can be used for significant expenses like college tuition or starting a business. The aforementioned one-time payments can be quite helpful for paying for important life events, which is why Child Insurance Plans are so important for long-term financial planning.
8. Death Benefit: If the insured unfortunately passes away, Child Insurance Plans pay out a death benefit to make sure the child is still financially stable. This benefit can help pay for things like school and living expenditures in the future.
9. Savings for the long term: Lastly, Child Insurance Plans help children save money for the future. By putting some of your money into a plan for your child, you teach them to save money, which is good for your family. This disciplined way of saving helps you build up a large amount of money over time, which you can then utilise wisely for your child’s school or other key life events.
At last,
Child Insurance Plans are more than just plans; they offer to give your child a safe and successful future. These plans are a good way to protect your child’s health and well-being, from money to school and more. As a parent, your primary goal should be making sure your child has the best opportunities in life. Buying child insurance plans is a proactive step towards that aim.
