A child insurance plan, which combines insurance and investments, aids in financial planning for a child's future needs. The insurance component makes sure that a child is still safeguarded in the terrible event of a parent's passing. You can build up a large enough corpus through the investment route to protect your child's future.
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Child insurance policies in India offer flexible payouts at significant junctures that might efficiently pay for a child's education at various times.
A child insurance plan is a type of life insurance policy designed to provide financial protection for a child's future. Child insurance plans can also offer other benefits such as waiver of premium, which means the premiums are waived in case of the parent's death or disability.
Some plans also offer savings or investment features, which can help parents save for their child's future education or other expenses. Child insurance plans can be a useful tool for parents who want to ensure that their child is financially protected in case of an unexpected event.
However, it is important to carefully consider the terms and conditions of the policy, as well as the costs and fees associated with it, before making a decision. It's also worth noting that some financial experts believe that a term life insurance policy for the parent(s) may be a more cost-effective way to provide financial protection for the family as a whole.
The importance of child insurance can not be understated given the unpredictability of life. Children rely on adults for a variety of things, including food and money to pay for their education. A child shouldn't have to suffer financially after losing a parent in order to get the most basic level of care and education. This is why having child insurance is crucial if you're a parent.
In India, there are several types of child insurance plans available in 2023, which can broadly be classified into the following categories:
Traditional Child Insurance Plans
These are basic insurance plans that offer life cover for the child along with a savings component. The premiums paid towards the policy are invested in a low-risk fund, and the policyholder receives the sum assured along with the bonus upon maturity of the policy or upon the child's death. These plans are ideal for parents who prefer low-risk investments.
Unit: Linked Child Insurance Plans
These are investment-oriented insurance plans that provide a life cover along with market-linked investments. The premium paid towards the policy is invested in a fund that invests in equity and debt instruments. The returns on the investment are dependent on the performance of the underlying fund. These plans offer higher returns than traditional plans, but they come with higher risks.
Child Education Plans
These plans are designed specifically to cater to the education needs of the child. The policyholder pays a regular premium, and the money is invested in a fund that aims to provide returns that are sufficient to meet the child's educational expenses. The policy comes with a maturity date that coincides with the time the child is expected to start higher education.
Child ULIP Plans
These are unit-linked insurance plans that provide life cover along with the option to invest in a variety of funds. The policyholder has the flexibility to choose the funds based on their investment objectives and risk appetite. These plans offer a good balance between risk and returns.
Child Endowment Plans
These are insurance plans that offer a guaranteed sum assured along with bonuses upon maturity of the policy or upon the child's death. The premiums paid towards the policy are invested in low-risk funds. These plans are ideal for parents who prefer low-risk investments and want a guaranteed sum assured.
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Choosing the best investment plan for a child is an important task, but here are some factors that you can consider to make an informed decision:
You should first determine your investment objective, whether it is to save for the child's education or to provide a financial cushion in case of any unforeseen events.
Read MoreYour risk appetite is an important factor in deciding the type of investment plan you should choose.
If you are risk-averse, then you should opt for a low-risk plan, while if you have a high-risk appetite, then you can choose an
Read MoreThe return on investment is a crucial factor to consider when choosing an investment plan. You should compare the expected returns of different investment plans before making a decision.
Read MoreYou should also consider the flexibility of the investment plan. Some plans allow you to modify your investment amount, while others do not Choose a plan that offers flexibility as per your requirements.
Read MoreYou should be aware of the costs and fees associated with the investment plan, such as premium charges, administrative charges, and fund management charges. Choose a plan
Read MoreThe lock-in period of the investment plan is also an important factor to consider. Some plans have a longer lock-in period, while others have a shorter period.
Read MoreChoose a plan from a reputed insurance company that has a good track record of performance and customer service.
The features of a child insurance policy can vary depending on the type of plan and the insurance provider, but here are some common features that you may find:
Life Cover
A child insurance policy provides life cover, which means that the child is insured for a certain amount of money. In case of the child's death, the sum assured is paid to the nominee.
Maturity Benefit
Some child insurance policies provide a maturity benefit, which is paid out to the policyholder at the end of the policy term. This can help the policyholder save for the child's future needs, such as education or marriage.
Premium Waiver
Some child insurance policies come with a premium waiver benefit, which means that the premiums are waived off in case of the policyholder's death or disability. The policy continues, and the benefits are paid out as per the terms of the policy.
Savings/Investment Component
Some child insurance policies also have a savings or investment component. The premium paid towards the policy is invested in a fund, which can be either low-risk or market-linked. The returns on the investment depend on the performance of the fund.
Tax Benefits
Child insurance policies offer tax benefits under Section 80C and Section 10(10D) of the Income Tax Act, 1961. The premiums paid towards the policy are eligible for tax deductions, and the maturity or death benefit is tax-free.
Flexible Premium Payment
Some child insurance policies offer flexible premium payment options, such as monthly, quarterly, half-yearly, or yearly. The policyholder can choose the premium payment frequency at their convenience.
Additional Riders
Some child insurance policies come with additional riders, such as accidental death benefits, critical illness coverage, or disability benefit. These riders provide additional protection to the child and the policyholder.
Child education plans and child life insurance policies offer several benefits, which are as follows:
Provides Financial Security
Child education plans and child life insurance policies provide financial security to the child and the family in case of the policyholder's death. The policy ensures that the child's education or other needs are taken care of even if the breadwinner of the family is no longer there.
Helps in Achieving Long-Term Goals
Child education plans come with a long-term investment component, which helps in achieving long-term financial goals such as funding the child's education or marriage. The policyholder can choose the investment option as per their risk appetite and investment horizon.
Tax Benefits
Child education plans and child life insurance policies offer tax benefits under Section 80C and Section 10(10D) of the Income Tax Act, of 1961. The premiums paid towards the policy are eligible for tax deductions, and the maturity or death benefit is tax-free.
Provides Peace of Mind
Child education plans and child life insurance policies provide peace of mind to the policyholder as they know that their child's future is secure, even if something unfortunate were to happen.
Flexibility in Premium Payment
Child education plans and child life insurance policies offer flexibility in premium payment. The policyholder can choose the premium payment frequency as per their convenience, and some plans also offer a grace period for late payments.
Guaranteed Benefits
Some child education plans and child life insurance policies offer guaranteed benefits, which means that the policyholder is assured of a fixed payout at the end of the policy term, irrespective of the market conditions.
The eligibility criteria for buying the best policy for a child in India may vary depending on the insurance provider and the type of policy. However, here are some general eligibility criteria:
The right time to buy a child policy in India depends on various factors, such as the child's age, financial goals, and investment horizon. Here are some scenarios when it may be suitable to buy a child policy:
Newborn Child
If you have a newborn child, it may be a good time to start investing in a child policy, as you have a long investment horizon to accumulate funds for their future needs such as education or marriage.
School-Going Child
If your child is already in school, you may want to consider buying a policy that offers a short-term investment horizon and aligns with your financial goals for their education.
Teenage Child
If your child is a teenager, you may want to consider a policy that provides a combination of protection and savings benefits to meet their future financial goals.
Anytime as per Financial Goals
The right time to buy a child policy also depends on your financial goals and risk appetite. You can buy a policy anytime based on your financial situation and investment horizon to meet your child's future financial needs.
The documents required to buy child insurance plans or child education plans may vary depending on the insurance provider and the type of policy. However, here are some general documents that may be required:
Application form
The policyholder needs to fill in the application form with their personal details and the child's details.
Identity Proof
The policyholder needs to submit a self-attested photocopy of any government-issued identity proof such as an Aadhaar card, PAN card, Passport, Driving License, Voter ID card, etc.
Address Proof
The policyholder needs to submit a self-attested photocopy of any government issued address proof such as Aadhaar card, Passport, Driving License, Voter ID card, Utility bills (Electricity, Gas, Water), etc.
Age Proof of Child
The policyholder needs to submit a self-attested photocopy of the child's birth certificate, school leaving certificate, passport, etc.
Income Proof
The policyholder needs to submit a self-attested photocopy of their income proof such as salary slip, Form 16, Income Tax Returns (ITR), etc. This may be required for some policies that have a minimum premium amount or for calculating tax benefits.
Medical Reports
Some policies may require a medical examination of the child, and the policyholder may need to submit the medical reports along with the application form.
Purchasing a child's education plan is a major decision that will impact your child's future. Before making an investment in one, it's crucial to take a variety of factors into account, including yields, liquidity, inflation, taxability and more. Read below to be aware of the factors that affect investing in child education plans
Financial Goals
Identify how much money you need to save for your child's education.
Decide when you need the money to be available.
Determine how much risk you are comfortable with taking.
Financial Goals
Identify how much money you need to save for your child's education.
Decide when you need the money to be available.
Determine how much risk you are comfortable with taking.
Investment Strategy
Choose an appropriate asset allocation for your child's education plan.
Consider the fees associated with the plan.
Research the track record of the investment options available.
Investment Strategy
Choose an appropriate asset allocation for your child's education plan.
Consider the fees associated with the plan.
Research the track record of the investment options available.
Fees and Charges
Understand the fees and charges associated with the plan.
Make sure you are comfortable with them before investing.
Evaluate whether the fees are reasonable for the services provided.
Fees and Charges
Understand the fees and charges associated with the plan.
Make sure you are comfortable with them before investing.
Evaluate whether the fees are reasonable for the services provided.
Performance of the Plan
Review the performance of the plan over time.
Monitor the performance of the investments in the plan.
Compare the performance of the plan to similar plans.
Performance of the Plan
Review the performance of the plan over time.
Monitor the performance of the investments in the plan.
Compare the performance of the plan to similar plans.
By entering the required information, you can compare and purchase the best child education plans at OKbima.com. Our professionals will respond immediately. Do you have any queries? Please don't be afraid to get in touch with us directly. Within a few hours, a member of our staff will be there for you to assist you.
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In today’s world there are a variety of convenient payment options in order to make purchasing child plan premiums easy. To ensure that your family is always secure, use one of these premium payment methods.
With the help of digital payments like Paytm, PhonePe, UPI, and many more, you may quickly and simply pay your life insurance premium.
You can quickly and conveniently make the insurance minimum payment online using credit cards and debit cards.
Additionally, you have the option of using the Electronic Clearing System (ECS), which prevents fraudulent encashments brought on by instrument loss during transit.
The following are some of the best child plans offered in India:
| Plan | Type of Plan | Entry Age | Maturity |
|---|---|---|---|
| HDFC Life Youngster Udaan- Child Plan | Endowment Plans with money back option | 30 days - 12 years | 75 years (maximum) |
| Bajaj Allianz Young Assure | Endowment Plans | 18 - 50 years | 28 - 60 years |
| LIC Child Career Plan | Money back Endowment Plan | 30 days - 12 years | 23 years - 27 years |
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A child insurance plan combines insurance and investing into one package. Even if something were to happen to you, the life insurance component ensures that your child is financially secure. The investment part helps you to expand your finances in order to ensure the future of your child. You can use the money you save to help your child achieve his or her educational and career goals. Because investing allows you to expand your money, it is a better option than saving, which cannot offset inflationary consequences.
You can choose from the following types of child plans to safeguard your child's financial future: 1. Child Unit-Linked Insurance Plans (ULIPs): A ULIP is a combination of insurance and investing. Each year, the amount you pay to keep your plan operating is divided in half. One portion is used to pay for life insurance The other balance is invested in a variety of funds. 2. Children's Savings Accounts: You can invest in a child savings plan, but it is not connected to market returns or dangers. These plans include life insurance, maturity benefits, and tax benefits, making them a good and safe choice
This is the best place to begin answering this crucial question when selecting a child plan. It's critical to consider the type of schooling for which you're saving the corpus. Given today's competitive nature and the need of multidimensional development, it's critical that every child participates in extracurricular activities. If your child decides to pursue extra vocational training in a sector of their choice in the future, you must set aside sufficient funds.
Starting early allows you to invest for a longer period of time and build your money continuously. It occurs prior to deciding on a long-term investment strategy.
You must plan for your children's education expenses based on annual inflation rates when calculating how much to set aside.
Your plan's maturity phase is usually determined by your child's current age. Your child will be in college in 11 or 12 years if he or she is presently six years old. As a result, you must select a kid education plan with a minimum maturity period of ten to twelve years.
A partial withdrawal feature may be useful if you need cash quickly before your plan matures. The ability to withdraw money at regular intervals could be extremely beneficial in meeting escalating educational costs.
The majority of kid policies feature a premium waiver, which allows the policy beneficiary to continue to benefit from the plan after it has matured. If the policyholder dies, all outstanding premium payments are cancelled, and the nominee receives a guaranteed sum at maturity.
You can select one of them based on your risk tolerance. If you have a higher risk tolerance, you can invest in unit-linked child plans or equities for a period of 10 years or longer. If you're hesitant to incur investing risks, an endowment plan that is safeguarded against market volatility while still providing adequate coverage is a preferable choice. Endowment plans can be used for both savings and insurance.
Depending on the terms and conditions of your plan, you may be eligible for rewards. After the first year, bonuses begin to be credited, assisting in the fund's maximisation. A reversionary bonus might be straightforward or complex. A monetary incentive as well as a final bonus may be offered in some programmes.
Section 10D of the Income Tax Act of 1961 exempts the sum promised from taxation, including any bonus claimed on maturity or due to the insured's death. Under Section 80C, the insurance premium is also tax deductible.
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