Tax Benefits
Education Plan
Having a child is a milestone in every parent’s life where the child becomes their little bundle of joy. While a child brings happiness into the family, planning for its secure financial future becomes every parent’s primary responsibility. Parents toil day in and day out to ensure that they can provide the best for their children. If you are a parent, you will relate to this sentiment. You want the best for your child, whether in terms of nutrition, education, or career.
When it comes to the child’s education, you cannot ignore the costs. Academic competition is increasing day by day, and the cost of a good education is steadily becoming unaffordable. That is why you need to plan ahead and create a corpus for your child’s education, whether primary, secondary or higher studies.
A Child insurance plan is a combination of insurance and investment plan to help you secure your child’s future. Child insurance plans ensures that money is not a hurdle when you are on your journey to plan important milestones for your child, right from education to higher studies.
Investing in a child education plan in India will make you financially ready to support your child’s dreams even when you are not around. So, you can be assured of your child’s future and enjoy present moments with them without worrying.
With the rising education cost and increasing inflation rate, your monthly savings plans may not be sufficient to protect your child’s future financially. After all, education fees and expensive courses should be the last constraint when you want your child to shine bright in a competitive environment and achieve their dreams and career desires.
A child plan in India allows you the flexibility to invest in your child’s future, helping you align your investments with your child’s education needs, future dreams, and desires, as well as your current financial status. The best child plan typically provides life insurance of 10 times your annual income. So, you can protect your child’s dreams and help them shine bright in their future even when you are not around.
But how would you know how much is enough corpus to support your child’s education? Well, a child plan calculator can help you plan your investment in a child plan by taking into account your regular investment, your estimated corpus, and the policy tenure to achieve that goal.
So, how does a child education plan help you support your child’s dreams and secure their future in your absence? A child education policy comes with some unique features and benefits that allow you to invest in your child’s future without stretching your financial appetite and affecting your other monetary investments.
Here are some of the features and benefits of a child education plan.
Features of a child insurance plan
Based on the type of child plan in India you choose, whether ULIP or a traditional endowment plan, the frequency of payouts may differ. However, the basics of both the child plans work the same. In case of the unfortunate death of the insured parent, the remaining future premiums, if any will be waived off. The payout structure decided at the inception of the policy shall work as is for the benefit of the child beneficiary.
If the insured parent outlives the policy tenure, The payouts as per the policy schedule would be given. Moreover, if you require financial support for your child’s education mid-term, you can withdraw a partial amount from the built corpus of the child plan in case of a unit linked insurance plan.
Deciding on the right amount of corpus will be the key to securing your child’s future. There are a variety of child investment plans that allow you to invest in your child’s future while aligning your investment to your current financial status and your child’s educational needs.
Now, to determine the right amount of educational corpus, you need to keep in mind these factors – your financial and risk appetite, the time you have to build the corpus, the inflation rate, your age, and other investments.
As with any other investments, child investment plans have the same unwritten rule of success, which is to start as early as you can. So, you can have a longer policy term to build the desired corpus without taking unnecessary risks.
Next is understanding your sources of income, your expenses, and your current savings. See if you can control or reduce your expenses to invest more into the child education investment plan to gain higher returns.
Make sure you choose the right plan among the child investment plans available in India to receive major benefits and higher returns on your investment.
You can use an online calculator for child investment plans to decide the educational corpus based on your risk appetite, policy tenure, and rate of return.
With the uncertainty of life, we experience, investing in just any child plan in India is not enough. Along with choosing the best child plan, here are the tips you should follow to get higher returns on your investment in a child insurance plan.
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The AYSS plan is an excellent product which covers life as well as provides the right financial returns to help me plan for my child’s higher education. I fund it to be a very different and attractive plan and would recommend all to invest in it.
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Mr. Parvinder Singh
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All your doubts and questions answered by the experts
Having a family can be tricky with the sacrifices, responsibilities, and expectations involved
Becoming a parent comes with joyous moments and responsibilities of raising a child
Saving and investing money becomes easier for parents when they have a goal in mind.
Child policy takes care of your child’s financial needs, both during your lifetime and after your demise. As a beneficiary, your child receives matured amount either in a lump sum or flexible / regular payouts. The main motive of child insurance plans is to secure your child’s financial future.
Child plan in India not only serves as insurance but proves to be a great investment tool. Investing in child policies as early as possible will offer you higher returns in the long run, and you will have enough finances for your child as and when the need arises.
Almost every child plan in India offers various rider benefits, which are generally not included in base plans. Before you buy a child savings plan, understand what supplementary benefits the plan offers.
1. Regular Income Availability – The plan might be able to offer regular income throughout the policy term or post the insured parent’s death without the liability of paying further premiums.
2. Premium Waiver Availability – Since the parent insured buys the plan for securing the financial future of the child, there should not be a burden on the surviving parent to pay premiums for policy continuation.
3. Option of Increasing Existing Cover : Availability of a rider like the Term rider, allows the parent to get additional Sum Assured equal to the policy Sum Assured with a nominal amount of extra premium.
With growing education cost and inflation rate, about 60% of parents worry about their child’s future. You should opt for a plan that offers financial support at different stages in your child’s education, provides life cover for the parent/s along with tax benefits. When choosing the best child plan, do consider the following major factors:
Increasing cost of education - Quality education is crucial for your child to shine in today’s competitive environment. However, without proper financial planning parents may have to struggle with the fee constraints. Above all, if your child decides to pursue higher education abroad, it will cost you a fortune.
Basic monthly savings are not enough to compete with increasing education cost and inflation rate. However, with best child investment plans, you can secure your child’s education and let them chase their dreams without worrying about finances.
A Child Insurance Plan has various long-term benefits. It’s not only about financial protection in case of unfortunate situations but investing in your child’s ambitions and bright future. Parent has to invest minimal insurance premium as the amount is spread over a long-term. Your minimal annual investment over long-term can build a corpus, which can be utilized by your child for his/her education, career, marriage, and many such important goals in life.
Protection against untoward situations -The major benefit of Child Investment Plan is the life cover. Your child receives a lump sum amount or flexible payouts in case of insured parent’s unfortunate demise. Insurance riders such as accidental death and critical illness riders provide added benefits that slightly higher premium. A proper insurance policy helps your child take care of expenses even in your absence so that they can move ahead in life.
Easy finances for higher education - Although an education loan might help you complete your child’s dream of studying abroad, a Child Savings Plan maturing at the right time can fill the remaining gap. So your child can focus on her or his studies without worrying about finances.
Investing in your child’s future - Better be safe than sorry. Early planning and the right child investment plan can help you help you secure your child’s future and prepare him/her financially to to face any unexpected situations.
Parents who have children between the ages of 0 – 10, who wish to build education corpus for their child are advised to invest in child insurance policies. You can buy child plan the day your child is born or start investing in one on your child’s first day of school. However, the earlier you start investing, the higher will be the returns. Early investing in the best child education plan will also keep the premium amount to a minimum.
While you decide on the amount of insurance cover, do consider your current income and expenses. Pending loans and credit bills also need to be considered.
The growing education cost and the inflation rate will make it difficult to meet your child’s need for quality education. Thus early child investment plan will give you enough time to plan for your child’s secure future.
A child education plan offers dual benefits of investment and insurance. Policies providing financial protection are also known as child insurance plans. Though named as an education plan, these plans provide flexible payouts for important events in your child’s life such as studying in abroad, starting a business, or marriage.
There are two main types of Child Investment Plans: traditional endowment plans and market-linked ULIP plans. The policy terms depend on the type of Child Plan you choose.
We believe every child is unique, so are their needs and dreams. Based on what parents like to choose for their children Aviva offers two best child plans meeting parent’s needs and helping your children on every step of their life.
There are many traditional ways you can invest for your child’s future. For decades people have been investing in gold, real estate or in FDs and RDs. Though these are the popular means of investment, returns on FD and RD investments can’t meet the growing education cost and inflation rate.
While investing in gold or real estate can be an option, the prices tend to fluctuate, and returns are uncertain. Also, one has to wait for the payouts after selling these assets. A right Child Savings Plan tackles all the hurdles. A Child Savings Plan helps you with finances on every important step in your child’s education. It also acts as a life cover in case of the insured parent’s untimely death.
Insurance companies offer child policies with various tweaks and added benefits to suit your needs. However, before choosing a child plan, you should understand the basic types that fulfill the general needs of the insured person.
1. Traditional Child Plan - In this plan, your investments are put into the debt market. The plan provides guaranteed / non-guaranteed payouts and there is security due to low-risk investment into various debt instruments.
2. Unit-Linked Investment Plan (ULIP) - Through this plan, your investment is divided into debt and equity instruments as per your risk profile. Thus you get dual benefits - higher-returns from investing into the equity market and rebalancing the risk with debt investments. Though invested in high-risk products, ULIP might provide higher returns to secure your child’s future.
3. Single Premium Insurance Plan - At times, some parents feel pressured having to remember the dates and set aside premium amounts every year. Single premium insurance plan allows a one-time payment, without compromising the benefits.
4. Regular Premium Insurance Plan - These plans allow parents to choose policy benefits they would like for their child. The regular premium insurance plan provides the flexibility to align the premium paying term to their active earning period. There might be a flexibility of paying premiums at a suitable frequency suitable viz. monthly, quarterly, half yearly.
Choosing the best child plan is not easy. You have to consider all possible scenarios before you come to your decision. Here are a few tips that will help you find the right policy for your child:
1. Plan the stages - Make sure the premiums and policy period are spanned out to the specific events of your child’s life. That way, you will have enough finances to support your child’s significant decisions such as studying abroad or starting a business.
2. Premium frequency - Know your investment appetite and how frequently you can pay the premiums. Some insurance plans allow the policyholder to pay monthly, quarterly, or annually. Also, the premium amount depends on the maturity amount of insurance as well as the period. Hence, the earlier you start, lesser the premium will be.
3. Rider benefits - Parents often worry about paying repetitive premiums and if their child will be protected in unexpected situations. A waiver rider eliminates the need to pay remaining premiums after parent’s death. Also, choosing a single premium plan will allow you to pay a one-time premium. Know about different riders and choose the right one for your child.
4. Estimate the inflation - While deciding the insurance cover amount consider the rising inflation along with your daily expenses, pending loans and credit bills. That will help you to invest the right amount and ensure a financially secured life for your child.
Aim of child plans is to ensure adequate money for education and marriage, irrespective of survival of parent.
The key difference is that a child plan has additional features to secure child’s future even if parent is not around.
For e.g. Mr. X is 35 years old and has a 4 year old child. He wishes to ensure that an amount is available to him when his child passes out of class 12. He starts investing Rs. 25,000 per year in a saving instrument. He also invests Rs. 25,000 each year in a child insurance plan. At age 40 Mr. X suffers a severe heart attack and dies.
His family receives the following :
From the financial instrument |
Rs 31,679, which is as much as he has saved for 5 years with an assumed growth of 8%. |
From the child insurance plan |
1. Immediate lump sum payment as death claim settlement which is not less than Rs. 2,50,000 2.No need to pay further premiums, policy continues till age 18 of child. 3. A lump sum is paid out as initially planned at child’s age 18 and policy closes. |
In case of the incident for which the claim needs to be filed, the insurance providing company needs to be informed about the incident as soon as possible, by the nominee if major / appointee or any other member who has the details of the policy, either by personally visiting the nearest branch or informing over a call or a message.
Submit the claim form with the required documents and provide the necessary details such as the date and cause of the incident, particulars of the policy, and details of the nominee.
Once the claim is registered, the insurance company will assign an accessor to verify the case and the supporting documents.
In case of the claim is approved, further investigation will not be needed, and the nominee will receive the claim benefit as per the regulatory mandated turn around time.
A good education can give your child an opportunity to earn a better livelihood and lifestyle. Thus, building enough educational corpus for your child is crucial. While building enough corpus, you need to consider your current financial status how much you can safely keep aside every month for your child’s education and future.
Your regular saving amount, the policy tenure, and rate of return will decide how much corpus you can build when your child turns 18.
