A financial plan is mandatory in today’s world to secure the future of children. Financial planning can help to fulfill the necessary requirements for the worst.
CHILD INSURANCE PLAN
Child Insurance Plan is a life insurance plan that provides benefits on the maturity of policy or death of the policyholder. This plan is availed by parents by nominating their child as the beneficiary. Alternatively, there is an option to buy life insurance plans which cover the child’s life.
REQUIREMENT OF CHILD INSURANCE PLAN
Child insurance plan is necessary because:
1. Securing the child's future in case of financial emergencies is important.
2. The studies and future of child should not be disturbed in case of any unfortunate event.
3. Parents get satisfied and carefree since the future their little one is safe.
4. Plans with periodic payouts on attaining certain age of the child prevent regular financial payout.
ADVANTAGES
1. Indemnify loss on death: On the death of the life insurer during the term of the policy, the insurance plan indemnifies any loss and provide sum assured to the child.
2. Waiver of Premium (WOP): In case of death or disability of the parent, the future premiums are waived off while the benefits remain.
3. Periodic Payouts: Certain plans offer periodic money back to fulfill financial requirements at various stages of childhood.
4. Guaranteed benefits or Bonus: An additional benefit of a fixed percentage is available on the maturity of the child insurance plan. Some policies also offer a bonus which increases the total amount under the plan. In the case of Unit Linked Child Plans (ULIPs), extra fund units add up in the total value.
5. Partial withdrawals: Child insurance plan provide partial withdrawals during urgency.
6. Maturity Benefit: In ULIPs, the total value of a fund is calculated by multiplying the number of units in different funds with the net asset value of the funds.
7. Loan Benefit: There is a facility to avail loan on certain situations under child insurance plan except in case of ULIPs.
8. Rider Benefit: Child insurance plan allows adding more benefits to the base policy on payment of extra rider premium to boost policy coverage.
9. The benefit of Tax: Tax benefits under Section 80 C and also under Section10 (10 D) of the Income Tax Act, 1961 can be availed under the child insurance plan.
DIFFERENT KINDS OF CHILD INSURANCE PLANS
There are various types of child insurance plans:
1. Traditional Child Insurance Plans:
The traditional child insurance plans offer a guaranteed amount on death or maturity of the policy along with additional features and are not market-linked insurance plans.
2. ULIPs:
Unit Linked Child Plans provide double benefits of investment to build a corpus for a child's educational requirement and they are market-linked life insurance plans.
GUIDELINES TO BUY CHILD INSURANCE PLANS
Few points should be considered while buying a child insurance plan, which includes:
1. Early start: The premium of child insurance plan depends upon the age and sum assured. The child insurance plan when purchased at an early age offers the benefit of lesser premium rates.
2. Inflation: Inflation has a major role in affecting the cost of education and related costs. Therefore, it is suggested to buy a child insurance plan that offers the extra coverage of inflation benefits.
3. Policy tenure: When buying child insurance plan select the tenure of the policy on attaining 16, 18 or 21 years of the child.
4. Risk: The traditional type of child insurance plan has no risk as compared to ULIPs which are market-linked and carry risk.
5. Comparison: Before buying any child insurance plan, it is important to compare and decide the benefits, features, cost of the premium, ease of claim settlement.
The child insurance plan requires savings to create a corpus for fulfilling the child's need in future without any obstacles. An early start is better to invest in child insurance plan along with a thorough review of the portfolio considering the benefits it offers.
