A plethora of investments options are available for those who wish to earn high returns on their investment. Few of these options such as gold, Public Provident Fund, mutual funds can help earn significantly high returns, but they require regular inflow of capital to grow. These investments schemes will automatically discontinue in the lack of funds which can be the case if the person investing dies.
Such investment schemes are a problem if you want to secure your child’s future in your absence. Every parent wishes to secure their child’s future from any contingencies as parenthood comes with a lot of responsibilities. If the family’s primary breadwinner dies an untimely death, the entire family suffers from financial crisis and, more importantly, the child. The most challenging part is continuing the child’s education and meeting the expenses. Education loan is always an option but it is generally available for higher studies or professional studies from reputed universities and the burden of loan falls on the shoulder of the child.
Choosing a Child plan
One should choose to plan for a life insurance policy the moment the child is born. Planning should be in a way where the educational expenses of the child is met. For instance, if the child requires 10 lakhs to complete education, the insurance plan’s maturity amount should be around 30 lakhs. Investing in a child plan comes with a lot of benefits other than providing financial coverage to the child. One is entitled to get tax benefits on the premium paid towards the policy under Section 80 C. The income is also tax-free under Section 10 (10D) of the Income Tax Act, 1961.
However, some people also prefer to go ahead with term insurance rather than buying a child insurance plan. Term insurance policies have a higher coverage but at a very low premium. But a term insurance plan gives away the lump sum on the death of the insured. This can be a problem if the insured dies at a very young age and the child is deprived of some regular income.
What Are The Benefits Of Having A Child Insurance Plan?
There are few perks of having a child insurance plan as compared to the life insurance plans. In case of early death of the policyholder all the future premiums are waived off. The company gives the nominee a lump sum amount and invests the remaining amount on behalf of the deceased, thereby assuring a regular income.
The policy continues till the maturity period and then the nominee receives the final amount. Thus, the nominee is entitled to receive a death benefit and a maturity benefit from a child insurance plan.
In case the policyholder is alive, he/she receives the maturity amount along with the accumulated bonus.
Few child insurance plans offer maturity benefits with timely pay out options during crucial times of the nominee’s life. While the child may receive a certain sum at the age of 18, rest would be received thereafter.
Therefore, parents should not delay investing in a child insurance plan and ensure the child’s financial security.