Although life insurance plans offer a host of varied benefits, their primary function is to ensure the retainment of the financial security of your beloved family members despite your absence. Moreover, if you even have one child, the responsibilities increase manifolds. It comes upon you to help them grow up, attain proper education, achieve their goals and fulfil their dreams.
Choosing a simple life insurance plan may not prove to be enough under such circumstances. Choosing a befitting child insurance plan becomes crucial to fulfilling the requirements. Considering the current scenario, the cost of education and the standard of living costs are reaching new heights each year. To alleviate the tensions, several insurance providers have come up with the innovative idea of child insurance plans.
What is a child insurance plan?
A child insurance plan is a unique combination of savings and insurance, ensuring your child’s financial security. Its primary target is to create a commendable financial corpus for your child, which can be utilised in the future to fulfil his/her dreams without any compromise.
A child plan is usually purchased by parents or guardians of a minor child, offering both maturity and death benefits. The parents choose the tenure during which the maturity proceeds will be received by the concerned child for use.
Even if an unfortunate event occurs during the plan term, the policy remains valid, and the child receives the proceeds as per the plan terms.
How do you choose the right child insurance plan?
Choosing the correct child insurance plan may prove to be quite challenging, especially for a beginner, as the market is loaded with innumerable products. However, if you keep these principles in mind, you might enjoy a smooth journey:
- Begin security planning before family planning:
Early planning is essential to ensure the proper security of your child’s future. To reap optimum benefits, experts advise you to ensure financial security for your children, even before birth. This is essential because if it gets too late, you will significantly miss the power of compounding in the case of returns. - Analyse your requirements:
When selecting the right child plan, you must evaluate your requirements beforehand. This must include the inflation factor; as most insurance plans are crafted to meet future needs. Your chosen plan must sufficiently cover all the relevant expenses of special skill development training, coaching, studies, higher studies, etc. - Plan comprehension:
You must clearly understand and know about child insurance policies before purchasing one. You must read the policy documents carefully to understand all the related terms and conditions. In case of any ambiguity, you can take the support of customer care. In the case of solid financial portfolio planning, you can always approach a professional. They can guide you well through the journey based on your circumstances. - Understanding your needs and capabilities:
Before purchasing a child plan, you must critically analyse your current financial status, affordability, and risk appetite. Your capability is usually determined based on age, income, and financial responsibilities. This evaluation must be very transparent and wise, as the outcome will determine the premium payable amount you can spare to pay. If the premium is higher, then you can ensure enhanced insurance coverage. However, the coverage factor must not allure you to opt for it unless you can afford to continue with it in the long run. - Riders:
Like life insurance or comprehensive vehicle insurance, you can also add befitting riders to your child insurance policy. This will enhance the coverage span of your base plan at a nominal additional cost. One of the most popular riders in this context is the premium waiver benefit add-on. Depending on the terms and conditions of the concerned rider, it will waive all the remaining premium dues in the case of any unfortunate event. It can be a disability, too, under certain circumstances. However, the life coverage facility will remain intact. You can ensure financial security for your child in this manner so that your absence does not hamper it much on the financial front. - Customisable plans:
It is best to choose a customisable child plan as the needs of children vary with time. Your resources must be enough to fulfil your child’s future dreams without compromise. Your chosen plan must be flexible enough to suit the changing requirements of your child. - Comparative study:
The market is currently loaded with innumerable products, each varying from the other. You must critically compare multiple competent plans, considering the premium payouts, maturity benefits, etc., to understand what suits you best and grab the best deal. Critical market research is crucial and indispensable before purchasing any insurance policy.
Benefits of child plans
Some of the major benefits of child insurance plans include the following:
- Secure the dreams of your children:
Child plans allow you to save a lump sum, which your child or children may utilise once they grow up to fulfil their dreams. This acts as a financial guide and security to ensure a smooth future for your child. - Financial stability:
These insurance policies ensure your child’s smooth financial future, irrespective of tough turns in life. Your child can continue his/her studies without much financial worries. - Maturity benefit:
If you purchase a child plan very early, your child may receive the maturity benefit once they reach college. Considering the inflation in the education sector, this has become very essential. - Income tax benefits:
The premiums paid towards the child plan enjoy tax benefits u/s 80C of the IT Act. The optimum yearly tax deduction claim limit is INR 1.5 lakhs against the premium paid. The payout is also tax-free u/s 10 (10D) of the IT Act, subject to terms and conditions.
Conclusion
We have highlighted the significant aspects of child insurance. If you have a girl child, there are special investment plans for girl child, too. Considering all these aspects, you can make your choice.