How life insurance can help you with your child's dreams
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Sure, life insurance can help you secure your family's future. But that's not the only life goal that a life cover can help fulfill. Depending on the type of life insurance you choose, you can meet many different life goals with just one policy.
In fact, with the right kind of insurance plan, you can even secure your child's future milestones and make their dreams come true. If this sounds like something you are looking for, what you need is a child insurance plan.
What is a child insurance plan?
A child insurance plan is a kind of life insurance policy that helps parents plan for their children's key milestones. In addition to a life cover, a child insurance plan also offers financial benefits that can be used to meet the costs of all the big dreams that you have for your child - like providing them with a quality education and giving them a grand wedding.
Child insurance plans can be of two types.
Child savings plans
A child savings plan is an endowment plan that offers guaranteed returns at the time of maturity. Parents can plan their purchase in such a manner that the payouts coincide with the time their child goes to college. These life insurance plans offer you returns that are not tied to any market risks.
Unit Linked Insurance Plans (ULIPs)
ULIPs can also help you with your child's big dreams. These life insurance policies give you the advantage of market-linked returns. You can choose from a variety of investment options like equity, debt or even a mix of the two to invest in your child's future. ULIPs also offer you a life cover, thus combining insurance and investments.
How does a child insurance plan work?
In a child insurance plan, the parent, who is the policyholder, pays a premium to the insurance provider. This premium can be paid on a monthly, quarterly, In return, the parent gets to enjoy a life cover. But that's not all.
A child insurance plan also offers maturity benefits at the end of the policy term. Typically, parents plan their purchase such that the end of the policy term coincides with the time their child is ready to head off to college, or when their child's wedding is nearing. The guaranteed payouts from the child insurance plan can help pay for these major milestones.
Furthermore, child insurance plans also help secure the little one's future in case of an unfortunate event like the parent's demise. The life insurance provider pays out the sum assured as death benefits in case of such an event. This can help secure the child's future financially.
Let's take a look at an example to understand this better.
Say Anand has a 4 year old daughter. And to secure her future, he buys a child insurance plan with a policy term of 15 years. The premium for this policy is charged on an annual basis. So, Anand pays the premium regularly for 5 years. By this time, his daughter is 9 years old.
And unexpectedly, at this point, Anand passes away due to a sudden illness. So, as per the terms of the policy, the life insurance provider pays the sum assured to the daughter, who is the nominee.
Alternatively, if Anand survives the policy term of 15 years, the life insurer pays out the maturity benefits to him. He can then make use of the funds to meet the cost of his daughter's college education, as she would be around 19 years by that time.
Features of child life insurance plans
The example you saw above was a very basic version of a child plan. Today, child insurance plans come with a variety of features that help you make your child's dreams come true. Some features are common across most child plans, while others may be exclusive to certain policies.
Here's a closer look at some such beneficial features that you can take advantage of.
Lump sum payouts
Most child life insurance plans pay out a lump sum amount at the time of maturity. As we saw in the example above, this benefit can be used to meet the sizable costs associated with major milestones like your child's education and wedding.
In addition to a lump sum payout, many child life insurance plans also offer periodic payouts known as milestone benefits. The regular payouts are made during the policy term, and you can make use of these funds to meet other minor costs associated with your child's big dreams, like their coaching fees or other tuition fees.
For instance, the ABSLI Child's Future Assured Plan offers options like the Education Milestone Benefit and the Marriage Milestone Benefit plan variants.
Some child life insurance plans also allow you to make partial withdrawals. This facility is useful for those needs that you do not expect, like an unforeseen medical emergency involving your child.
Waiver of premium rider
This is one of the most beneficial features of a child insurance plan. You can choose to add the waiver of premium rider to your base plan at the time of purchase. This rider ensures that all future premiums are waived off in case of the parent's death during the policy term. The policy will continue to exist and the child will enjoy the benefits guaranteed under the plan.
How can a child insurance plan benefit you and your child?
You've seen the beneficial features of a child life insurance plan. Let's now take you through how this kind of insurance can help you fulfill your child's dreams and life goals.
It helps you build a sizable fund for your child's big milestones
The biggest advantage of a child insurance plan is that it helps you save up for your child's big dreams. This is particularly relevant because the costs of education - which is one of the biggest milestones in your child's life - are on the rise.
To illustrate this point, let's look at a quick example. Say you want to save up for your child's future MBA expenses. Today, the cost of the MBA program you're eyeing is around Rs. 30 lakhs. Your child is 2 years old, and you assume you have 20 years to save up for this. But when you factor in inflation, even at just 6% per annum, the cost of this program could be around Rs. 96 lakhs 20 years down the line!
A child life insurance plan can help you create a sizable corpus for these big life goals.
It acts as a collateral for education loans
Rising education costs may also force parents to rely on external financing like education loans. A child insurance policy can make it easier for parents to obtain this kind of a loan, since it acts as a collateral.
It protects your child financially in your absence
A child insurance plan, at its very core, is a life cover. So, in case of the parent's unexpected demise, it offers adequate financial protection to the child and to the surviving spouse. In addition to this, choosing the add-on waiver of premium rider also waives off any future premiums and allows the plan to continue.
It offers customized payouts for your child's many needs
Depending on the child insurance plan you are purchasing, you can choose to receive a lump sum payout at maturity, milestone benefits during the policy term, or a combination of the two. This way, you can meet the intermittent goals as well as the major goals in your child's life.
If you are yet to plan for your child's future, it's best to start as early as you can. And a life insurance plan tailored for your child's dreams can be the right place to begin. Check out your options from different insurance providers, compare the plans available, and choose the child insurance plan that works best for your child's individual needs and dreams.
Read next: WHY LIFE INSURANCE IS MORE TAX-EFFICIENT THAN OTHER INVESTMENT OPTIONS
A child insurance plan does more than just help you with your child's dreams. It also allows you to save tax. In fact, life insurance is more tax-efficient than other investment options. We have a blog that tells you why.
ONE PLAN THAT COVERS ALL YOUR LIFE GOALS - INCLUDING YOUR CHILD'S BIGGEST MILESTONES
That's the ABSLI Guaranteed Milestone Plan for you.
It gives you fully guaranteed benefits on maturity, so you can give your child the best education money can buy and the wedding of their dreams.
Bonus points - you can also choose to include your spouse in the life cover. This plan truly offers something for everybody in the family!BUY CHILD INSURANCE PLAN
ABSLI Child's Future Assured Plan (UIN: 109N124V01) is a non-linked non-participating individual life insurance savings plan.
ABSLI Guaranteed Milestone Plan (UIN: 109N106V10) is a non-participating traditional insurance plan.
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