Most people are confused about how they should plan their Life Insurance po...
It is not unusual then, that a similar mind-set translates to their Investments, with their children’s future paramount.
What is a Child Plan?
Child Plans are custom solutions offered to parents looking to secure their Children’s future at various crucial stages, in the event of any unfortunate eventuality.
These plans offer a multitude of benefits to the beneficiary, and ensures pay-outs at critical junctures, such as higher education or marriage.
The plans usually offer the benefits of a Term Insurance, with the maturity of the policy and pay out occurring when a milestones such as marriage or education is reached. Some of the good child plans that you may consider are Aviva’s Young Scholar Advantage, Reliance Education Plan and LIC’s New Children Money Back Plan.
More significantly, if in the interim something unfortunate happens to the parent; the Sum Assured is paid to the child and the policy continues without any break as the insurance company pays all the future premiums.
Benefits of Child Plans
1. Child's Welfare Is Paramount:
Most parents investing for their children have to pick from solutions not designed specifically to deliver benefits to children. For instance, Term Insurance pays out at an arbitrary and pre-determined time, without any correlation of actual expenses. With Child Plans the policy is tailored to meet these expenses as and when they arise, ensuring seamless and hands-off cover.
2. Insurance Company to Pay Premiums
In case of some unforeseen event happening like death of parents, the Insurance Company will continue to make payments on the Policy, ensuring long term security and benefits.
3. Mandated to Protect the Child
Child Plans are also very clearly mandated to protect the interests of your children, and least likely to be diluted/reallocated by you (on an impulse) or by persons managing your estate under unfortunate circumstances.
Limitations of Child Plans
1. Long tenure:
Child plans by their very nature are long term, and vary from 10 to 20 years. It is therefore important to begin early, so as to utilize the plan to its full potential. A long term plan ensures lower premiums yield higher returns at the time of pay-outs.
2. Restrictions on modifying your investment:
Child plans are also restrictive in terms of modifying your investments should a more attractive Investment opportunity present itself. However, this works in your favour in a highly volatile market however, and ensures stable returns with minimal risks.
Child Plan Vs Term Plan, Which is better:
One must understand that child plans and a standalone term plan are two very different product. A standalone Term Insurance is cheaper than a child plan, but serves the need of the family in case the bread winner meets with an untimely demise. The moment your insurer pays the insured sum, the policy is terminated. Whereas, a child plan continues to grow with the Insurance Company taking over the premium payments till maturity.
Providing a secure and well provided for future for your children is then simplified with the introduction of Child Plans. These offer a single policy solution tailor made to provide benefits at key events in your child’s life, all the while ensuring your investment is secure and continues to grow with your child.