Parents always wish to fulfill the child’s dreams of an ideal career, dream wedding, capital for business and so many other specialized needs that children have from time to time. With the wish comes the realization that they need a fortune to be able to get desired education and training for the child. They save and they invest for wealth enhancement just so that they can accomplish the task of saving enough. It is investment insurance plans designed to help you do just that.
Figure it out
Why do you need a child insurance plan? For most the reason will be, “to save for the child’s education” and some may add “marriage or regular income till the child is independent”. The reason that comes out most prominently is to provide for child’s financial requirements, whether the parent is there or not. So while buying a plan, identifying your need and time you may need finances at have to be figured out carefully.
Benefits of a Child Plan
Since child plans are investment plans, they combine the benefits of insurance and investment. The premium is bifurcated for the purpose. While traditional plans give out guaranteed amount, ULIP are market linked and the returns are based on the performance of chosen funds.
• Disciplined Savings
Child plans are systematic and disciplined way to save for the child’s future. The money put into a plan provides for insurance as well as wealth enhancement. It becomes a compulsion and a habit to put the money into the plan come what may. So, irrespective of the financial condition, it has most probability to be continued till maturity.
• Creating a Corpus
Depending upon your capacity to take risk, you can choose between traditional or a unit linked child plan. With various individual advantages and disadvantages attached to each type, you are still able to create a decent corpus that comes handy at the time the financial requirement is maximum.
• Critically Chosen Maturity Date
At the time of choosing the child plan, parents need to evaluate their financial resources as well as the time at which they will need the corpus. At this stage parents have the liberty to choose the maturity of the plans such that they are able to meet the financial requirements at given life stages of the child.
• Waiver of Premium
The benefit that stands out in such a case is “waiver of premium”. So, if anything happens to the parent, anytime after buying a child plan, the premiums will be waived off and the policy maturity benefits will be given to the child, as planned by the parent, on maturity.
Right time to buy a child plan
Time at which you buy child plan is an important factor for the policy to be effective in terms of premium paid and the returns. Just like any investment to grow substantially, it taken for a longer duration pay better whether traditional or ULIP. Since the maturity date of these plans is fixed, it is better to buy these when the child is still young. This gives ample time for the funds to grow. Buying a plan early in the child’s life also makes premiums for the plan manageable and affordable for a decided upon corpus. Premiums for generating the same return rise with every year delayed. With that in mind, if the child is already in teens, child plans may not be very effective means. It is better to go in for other investment options along with a pure protection plan.
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