Probably one of the most important things that any parent must do for their family is to plan for future financial security. One important step in this direction is to buy insurance. With child plans, you can prepare for your child’s future needs. Be it higher education plans, marriage, or anything else, you can provide for your child’s future aspirations and dreams with the right child plan.
What Are Child Plans?
To put it simply, child plans are those financial products tailored to help you build a corpus to meet the costs of your child’s higher education and other expenses in the future. You may opt for ULIPs or traditional plans in this case. ULIPs essentially provide life coverage along with options for investments in various market-linked instruments, while traditional plans offer guaranteed returns. A child plan ensures that your child’s dreams are not financially compromised, even in your absence.
Types of Child Plans
Child plans generally come in two forms:
Traditional Child Plans:
A traditional child insurance plan provides a payout at predetermined frequencies or on maturity. The idea here is to make sure that the return is secure and therefore low risk. If you are a risk-averse investor, traditional child plans work well for you. Some child plans come with special benefits like lump-sum payouts for higher education and flexible withdrawal options to meet your child’s needs.
ULIPs:
ULIPs combine insurance with market-linked investments. One portion of the premium will be used for life insurance, and the other will be invested in debt, equity, or balanced funds. These policies may offer higher returns, although the risks may also increase due to market volatility. ULIPs can be more advantageous if you can remain invested long-term and have a higher risk appetite.
Key Benefits of Child Plans
There are multiple advantages offered by child plans, as listed below for your perusal:
- Disciplined Savings: There are massive financial responsibilities attached to raising children. One key benefit of child plans is that they instill a habit of disciplined savings, ensuring you stay committed to long-term financial goals despite other expenses.
- Tax Benefits: Child plans provide tax benefits as well. Your premiums for these plans will get you tax deductions as per Section 80C. Simultaneously, the maturity proceeds may be exempt from taxation under Section 10 (10D), subject to certain conditions.
- Customizable to Future Needs: Some child plans, especially ULIPs, may offer flexibility to adjust investments or withdrawals depending on your evolving requirements, such as higher education, weddings, or other future needs.
Conclusion
A child plan is vital if you are looking to gift the best possible future to your little one. With inflation and rising costs, it is all the more necessary to start creating a sufficient corpus to meet your child’s needs down the line. Hence, these policies are a great way to achieve this objective. Compare multiple options available across insurers before making a final decision.
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