Secure Your Childs Future With A Child Insurance Plan

A good education plays a crucial role in shaping up child’s life by bringing in self-discipline to build a solid career of their choice. In today’s highly competitive world, every parent wants to provide the best education for their children. While growing up, your child may have many dreams. Their goals may keep changing. A little child who wants to become a pilot today may start dreaming of becoming an astronaut a few years later. However, you can help them in effective goal setting while growing up, planning well in advance for goal-related education is extremely important.

Education inflation is rising year on year and it has been 10%-12% over the years, which is double the household inflation⁴. And the rapidly rising cost of education can be a hindrance to your children’s education in the future. Hence, it becomes imperative for you to plan well in advance to secure your child’s future financially to provide them with the best education. Building a child education fund is an extremely important thing that every parent should start as soon as the child is born.

Steps to Build Child Education Fund

Let us see how you can build a significant amount of funds for your child’s education. Here are some important steps:

• Assess your current financial situation:
  
  To understand how much money you can set aside for your future goals, the first thing is to evaluate your current financial position. Take into consideration of your assets (property, home, liquid cash, investment, etc.) and liabilities (credit card, home loan, or any other obligations) as of today to assess your current financial position. Knowing your financial position helps you plan for future goals.



• Evaluate the educational need of your child:
  
  Understanding your child’s future dreams and career interests can help you make a financial plan for them more efficiently. Though they may sound fickle, it is important to know what type of education your child might need in the future. You need to factor in inflation at the time of estimating the cost of education for your child.



• Establish a time horizon for each education milestone:
  
  You need to know how the time horizon for your child’s education goals. For example, after the 12th your child may want to opt for MBBS. This is the time when you need a lump sum corpus for a child’s education. After that, for masters, you would need a lump sum. There are other options or opportunities available such as scholarships, educational grants, and interest-free loans from certain universities, etc. can be explored. Knowing the time horizon helps you opt for the right investment option for your child’s future goals.



• Know the amount of savings to reach the target:
  
  Have an estimate of the target amount that you need for your child to achieve their dreams. When you know the target amount, you can calculate the amount of investment that you need to make to reach there, depending on the type of investment product you have chosen.



• Plan your investment wisely::
  
  When you know the time horizon, the target amount of the amount that you afford to invest on a regular basis, you need to choose the investment products wisely to secure your child’s financial future.
  
  With that, you need to be well prepared for any eventualities in life which can shatter your child’s dream. A child insurance plan is the only way to secure your child’s future against uncertainties of life to remove financial barriers from your child’s future in any situation. Let us see how you can remove the financial barriers from your child’s future with a child insurance plan.

Benefits of a Child Insurance Plan

Investing in the best child insurance plan can help you secure your child’s financial future. The following are the benefits of a child insurance plan:

• Protection against eventualities
  
  Eventualities in life like the sudden demise of parents and loss of income due to accidental disability can completely shatter a child’s dream due to financial distress. Insurance plans are the only investments that can provide complete financial security to your child during such unforeseen situations. A child insurance plan works like a safety net by providing lump sum benefits during such situations to ensure there are no financial barriers for your child. Be it a traditional child plan or unit-linked investment plan (ULIP). The beneficiary child would receive the pre-defined sum assured as a death benefit on the demise of the policyholder parent during the policy period. Sum assured paid in lumpsum can be utilised for a child’s education and other needs.


• Investment component
  
  Child insurance plan comes with an investment component. On maturity of the policy, the money invested would be paid off along with the return. If you invest in a traditional child insurance plan, you will receive guaranteed¹ benefits on maturity, which can be utilised for your child’s higher education needs. If you invest in a unit-linked investment plan, you can earn higher returns by market investments. In a ULIP, you can choose the asset allocation based on your risk profile and make switches based on your age.


• Partial withdrawal
  
  If you invest in a unit-linked insurance plan (ULIP), You have the flexibility to make a partial withdrawal of your investment whenever you have a liquidity crunch. However, it is important to remember that child insurance plans or ULIPs are designed for long-term goals, and hence partial withdrawal is wise only if you face urgent liquidity requirements.


• Waiver of premium
  
  Child insurance plans with the waiver of premium can be of great use when the eventualities like death or disabilities can cause loss of income. During such time, the premium is waived off, but the benefit of the policy continues till maturity.


• Tax benefit²
  
  A child insurance plan is a tax-efficient investment product. The amount of investment in a child insurance plan qualifies for tax deduction under Section 80C of the Income Tax Act, 1961, and exemptions can be availed under Section 10 (10D) of the Income Tax Act, 1961⁵. Apart from this, child insurance plans come with many unique benefits and riders to ensure financial protection for your child’s future. There are many comprehensive child insurance plans available which you can choose based on your need.

Here are some tips to secure your child’s financial future:

• Start investing early:
  
  When you are investing in your child, it is important to start early, as soon as your child is born. It is vital to protect them against the consequences of all uncertainties. Starting early ensures good growth of your investment with the power of compounding. Time is the real power! When you stay invested for the long term, you can build significant wealth to secure your child’s future.


• Have adequate insurance coverage:
  
  Unlike other investments, a child insurance plan offers the benefit of life protection along with the investment benefit. Choosing an adequate amount of life cover is important to ensure uninterrupted financial stability for your child, even when you are not around.


• Choose the correct time horizon:
  
  Choosing the correct policy term is extremely important to receive the lump sum policy benefit at the time of need. Choose the time horizon keeping in mind the age of your child now and the age at which he/she would reach the important milestone.


• Select the right plan with all in-built features:
  
  Along with the benefits, it is important to pay attention to the affordability of the child insurance plan. Look for a plan that comes with all the suitable and needed features at an affordable amount of premium. You can compare the products online and choose the right child insurance plan.
  
  Protect your child against unforeseen circumstances by investing in the right child insurance plan and ensuring financial stability for them to fulfil their aspirations.