Child plan is a mix of investment and insurance that usually aids in financial planning for kids’ future needs and requirements at the right age. You can protect and secure the future of your child with child insurance plans encompassing child education plans. Under a child policy, life cover is available as a lump sum payment at the conclusion of the policy term. This is not it; such plans also offer coverage your child with flexible pay-outs at the crucial milestones of the child’s education.
As a parent, you might dream of a bright future of him/her and investment is a vital step in doing so. Parents generally focusing on the major goals for their child such as marriage, education and a comfortable lifestyle as well. All these goals have different requirements, so it is essential to think about each separately and find the needful investment plan that can suit these requirements as well. For a bright future of your child, it is vital to think about the investment proposals as soon as possible.
Before investing everyone wants to be sure about the returns and the benefits that they will get in the future. Many questions arose in their minds at that time such as what would be the risks and benefit percentage? How will it help them?
Today the cost of education is so high that most of the parents are unable to provide their children the level of education they want. If this is the situation today, then you can imagine what would be the scenario in the future when the inflation will be much higher. A child future plan is designed to meet your child’s future financial needs.
Child investment plans are essential to meet the needs of providing the child with the best of education and to make sure that the cash flows are there at every crucial stage of your child’s growth. For instance, if your child is 4 years old and you plan to provide him higher studies after say, 15 years which costs Rs. 20 lakh today, then you can imagine how much would it cost after 15 years. Therefore, it become necessary to invest for your child today in order to have funds available at the time when the actual need arise.
Key features of Child Insurance Plans:
A child plan comes loaded with a wide range of useful features to ensure a rewarding return and protection. Quite expectedly, a child education policy is a must for every parent.
Quite often, a child education plan is designed to offer safety to the kids in the case of financial crunch during vital decisions of life. Child plans are available in both non-linked and linked types.
Here’s a little overview of just some of the many helpful and useful features of the best Child Education Plan:
The sum assured in a child education plan is the amount of money that is paid out in event of the unfortunate or untimely demise of the policyholder. Most of the time, the sum assured must be more than 10 times the current gross earning of the policyholder.
It is subject to the sum assured and the amount of maturity benefit you opt for. You may opt to pay the premium amount frequently on regular intervals or for a certain period of time. Most of the life insurance providers offer options such as annually, semi-annually, quarterly, and monthly mode of payment. The amount of premium varies depending on the sum assured you choose in case of the traditional child plans.
When you realize that your child should get on his/her feet is the best time for the policy to mature. Choose the policy term to meet the exact period. For example, if one of your children’s age is 10 years, then choose the policy term of 8 years.
Waiver of Premium Benefit
Waiver of Premium (WoP) is an inherent rider of a child education plan. This feature is applicable if the policyholder dies in a stipulated period of time. In such a case, the sum assured will be paid out to the nominated beneficiary, while the due premium for the remaining policy term is paid by the insurance company.
At the maturity of the policy, the nominee is entitled to receive the maturity amount as mentioned in the policy document. In case this feature is not a part of the plan, it is recommended to include it without failure.
It is often seen that parents instead of holding back themselves for the policy to mature, like to withdraw the sum assured in multiple fragments whenever they need it. This is often selected to fulfil the financial needs of the child at certain key moments. Many child plans also come with an option of partial liquidity.
Premium Payment Mode Sum Assured
The sum assured must not be less than at least 10 times your current income, says the thumb rule.
- Regular premium– Under this mode of premium payment, you need to pay the premium on a regular basis, viz. annually, semi-annually, or quarterly.
- Single premium – Under this mode of premium payment, the premium is paid only once.
You should choose the maturity amount keeping an eye on your child’s future. You can consult a financial advisor and remember the inflation rate along with interest rates and all other factors, plan the maturity amount that you would need at policy maturity. You can receive the maturity amount as a lump-sum pay-out or over a period of 5 years.
Also, child education plan such as single premium plan may not offer appropriate maturity features and benefits, so go through the fine prints of the policy document before applying.
A child education plan such as a ULIP plan enables you to choose the type of fund to make an investment (money market, hybrid, debt, and equity). You’re given an option of Dynamic Fund Allocation and Systematic Transfer Plan also.
Types of Child Insurance Plans
Almost all major insurance companies offer child plans as an important insurance product in their portfolio.
These plans may differ on various parameters depending on individual needs and priorities and come with a customization feature.
Regular Premium Plan
Because the call shows, those child plans provide the buyer a flexibility on premium payments, as in keeping with the benefit. One pays premiums yearly, half of-every year or quarterly.
Single premium Plan
Right here, the insured (figure) pays a lump sum quantity as a single premium for the entire term of the plan and be relieved from the duty of remembering payment dates. There may be no hassle of arranging the finances for premium payments throughout one-of-a-kind ranges of life. Some insurance companies additionally provide appealing discounts or decrease premium on such plans as they get the lump sum budget.
LIPs (Unit linked Plans) divide the premium received among debt and equity based totally investments for optimum returns. Child ULIPS make investments a small component in debt primarily based merchandise whilst essential amount is invested in equity products in order that the returns can be maximised for the kid over a long term. This includes higher risk, however then the chance of earning higher returns is also excessive! Also, the policyholder can determine how the premium may be invested and in what form of merchandise so the insured has a manage over his investments.
Child Endowment Plans
In these plans, the cash is invested in debt-based investment and the insurance issuer comes to a decision which products to put money into. Considering that it’s debt primarily based funding, the returns are not that high, but it’s should be in consideration to be secure compared to equity based investments and guarantee minimum returns.
Certain riders are available, which give you more than just a simple life insurance policy. These riders are available in three sub-categories:
- Accidental Death and Disability Benefit – The Accidental Death and Disability Rider Benefit pay the extra sum assured in the event of your unfortunate mishap causing death or disability.
- Premium Waiver Benefit – This rider may be already added to the best child education plan, so check your policy document in this regard.
- Critical Illness Rider Benefit – Critical Illness rider benefit offers coverage for a pre-determined set of critical diseases.
Advantages of a Child Plan
A child plan offers a wide range of exciting and unique benefits to the policyholder. With amazing advantages, a child education plan is a must-have in your kitty. This will help you make sizeable savings for your child without having to run from pillar to post.
Here’s a rundown to the advantages of the best Child Education Plan:
Corpus for Child’s Education
Even with minimum premium payment, child plans are able to provide as much as 10 times the amount paid in the child plan. This lump sum amount in child education plans can be foremost utilized towards education expenditure.
A child education plan is often enough to pay for college education, and even higher education in a foreign country. The money available from a child education plan depends on the terms and conditions of the plan and on the amount one has invested in it by way of premiums.
A Kitty for Medical Treatment of the Child
Child plans also allow the option of withdrawing money during the tenure of the child investment plans. This can be used for medical treatment of the child when he or she falls ill. Such partial withdrawals come in handy when the child is hospitalized due to an ailment, minor accident or a more serious medical condition. The best child plan helps to reduce the financial burden caused by medical expenditure and such payouts act as an add-on for one’s health insurance plan.
Supports the Child in the Absence of Parent(s)
Death does not come with an invitation and no amount of preparation can leave on ready for such an event. The consequences are more so for the innocent child. The death of the parent(s) causes severe trauma to a child and can leave his or her future hanging by a thread. The insurance company offers a premium waiver if the parent (i.e., the insured) passes away during the policy term of a child education plan.
The premium waiver benefit often comes inbuilt with the best child education plan. If not, one should definitely opt for this rider. The child receives a lump sum amount promised at the time of purchasing the best child plan and does not have to pay balance premium.
This rider enables the policy to continue without any breaks and passes the financial burden of remaining premium to the insurer.
Income Protection for the Child
A child education plan also protects the income of those children who start earning at a young age. It includes child actors, musicians, artists and performers among others. It provides the advantage of capital appreciation over the long-term for the child.
Acts as Collateral for Loans for Higher Education
Higher education is expensive, whether one plans to send the child to a private college or university in India or abroad. In fact, international education is significantly more expensive. A Child plan comes in handy if one intends to secure a loan for higher education as these are allowed to be used as collaterals. They can also be used as collateral for other child-related borrowings.
A child plan is a great education policy and the best investment plan for the child. The child education plan also instincts discipline and helps form the habit of saving to secure the child’s future.
Benefits of Child Education Plan
A child education plan offers dual advantage of comprehensive life insurance cover and maturity benefits. A child plans secure child’s future when you are not around. The plan can also be used as collateral for an education loan.
You can avail tax benefits under a child plan on death or maturity claim profits under section 10 (10D). Moreover, the premium paid for a child education plan is eligible for tax deduction under section 80C of the Income Tax Act, 1961.
At the time of maturity of the child plan, the sum assured is paid out to the guardian or parent. In the event of the early demise of the insured, the kid is allowed to get all the benefits of the child plan.
You can also avail secured loans against a child education plan.
Types of Child Plans
Mostly all the insurance providers offer child insurance policies as a vital insurance product in the portfolio. These child plans may vary on different parameters basis the individual priorities and needs and come handy with customised and tailor-made features.
Different types of Child Plans in India are:
Single Premium Child Plan
The policyholder pays a lump sum amount in the form of a single premium for the entire policy term and stays worry free from remembering the due dates of premium payment. You’ll not have to come across any hassles of making arrangement of finances for the premium payment. Some insurance providers additionally offer appealing discounts or reduce the premium on child plans.
Regular Premium Child Plan
Unlike single premium child education plan, regular premium child policy offers you flexibility on payment of premium. You can pay the premium monthly, quarterly, half-yearly, or yearly.
Child ULIP plan gives you a three-prolonged benefit, along with higher insurance coverage, contribution in the equity market, and disciplined investments. Three benefits mean that the nominated beneficiary, i.e. the child receives the sum assured on the demise of the insured parent or guardian. The future premiums are waived off and the maturity amount is paid when the policy matures, making sure that the future dream of your children is fulfilled.
Documents Required For Child Insurance Plans
Age proof – Birth Certificate, 10th or 12th mark sheet, Driving License, Passport, Voter ID, etc.(Any one)
Identity proof – Driving License, Passport, Voter ID, PAN Card, Aadhar Card, which proves ones citizenship
Income Proof – Income proof specifying the income of the person buying the insurance
Address proof – Electricity Bill, Telephone Bill, Ration Card, Driving License, Passport, should clearly mention the permanent address
Proposal Form – Duly filled in proposal form is required
1. What is Child Education Plan?
ICICI Bank presents “Child Education Plan”, a unique way to save for your child’s future. To fulfill your child’s dream & aspirations, begin by making small investments in a Recurring Deposit for a short tenure and receive regular payouts for the rest of the tenure in your child’s “Youngstar Savings Account”.
2. Can I take a loan on the Child Education Plan?
Yes. A loan of 90% will be sanctioned against the principal account balance of the Recurring Deposit in Investment Phase. In the Benefit Phase, the loan will be available at 75% against the remaining account balance of the FD and not the original principal amount.
3. Can I set up a Standing Instruction for installment payment in the Child Education Plan?
Yes, you can set up standing instructions through your ICICI Bank Account for paying the installments of the Child Education Plan in the Investment Phase.
4. What is the minimum installment amount for Child Education Plan?
The minimum installment amount for Child Education Plan is Rs. 500 and thereafter in multiples of Rs. 100.
5. How will the interest rate be assigned to Child Education Plan?
Child Education Plan will earn prevailing fixed deposit interest rates for the entire deposit period, i.e. same rate of interest in Investment and Benefit Phases. The rate of interest applied will be as per the total tenure of Child Education Plan, including both Investment and Benefit Phases.
6. Can I partially withdraw from the Child Education Plan?