We all love our children and give our best efforts in order to have them best of
everything in life, starting from best schooling, higher education and marriage
or till such time they are fully settled in their respective lives. In fact, children
future planning, which commonly comprises higher education and marriage, is a minimum
goal which every parent in India tries to achieve for their children.
But why this planning is required. The common myth is that we are working and therefore
have a steady income and as we meet other expenses we will be able to meet these
expenses too. But that is a myth! Here, the parents need to understand two things
very clearly –
Cost of higher education is going up at a rate which is much higher than that of
inflation. Therefore, you need to plan for building a corpus for future cost of
higher education and marriage of your child. You also need to plan at which point
in your child's life how much money you need and why. Once you have planned that
you should start saving for the goals.
But have you ever wondered, even after planning for the above goal, your child might
not achieve what you dreamt about his future? Yes, what you are wondering is correct.
Life is uncertain and therefore, the above plan might go haywire if you as a parent
are not there when your children need you most. Yes, you got it right! We are talking
about a situation when God forbid, something happens to your life.
Therefore, not only we need to build a corpus for meeting goals of our children,
we also need to protect their financial future by taking a child plan offered by
life insurance companies.
Before we plan about the protection of their future, let us first see what could
be the future cost of some of these goals.
Cost of higher education at present value
Future Value @8% inflation (after 10 years)
Future Value @8% inflation (after 15 years)
Future Value @8% inflation (after 20 years)
Engineering Degree Rs 15 Lakhs
Rs 32 Lakhs
Rs 48 Lakhs
Rs 70 Lakhs
MBA Degree Rs 25 Lakhs
Rs 54 Lakhs
Rs 79 Lakhs
Rs 117 Lakhs
Medical Degree Rs 50 Lakhs
Rs 107 Lakhs
Rs 159 Lakhs
Rs 233 Lakhs
Marriage Rs 20 Lakhs
Rs 43 Lakhs
Rs 63 Lakhs
Rs 93 Lakhs
As you can see from the chart above, the cost of a MBA degree 20 years from now
may cost you much more than Rs 1.00 Crore against today's value of Rs 25 Lakhs only.
Similarly, a decent marriage may cost Rs 20 Lakhs now, but, the same will cost you
around a Crore after 20 years.
The question is, are you aware about the above cost and if you have planned for
it? If you do not have a plan, then you must start saving in order to protect the
future of your children.
The protection of your children's future comes only from child plan of
life insurance companies. Life insurance not only helps you create a future
corpus for these goals, it also assures financial protection in case of sudden demise
of the parent.
These are life insurance plans which help you achieve these twin objectives – Corpus
building for the future expenses and protection of life. Child insurance is one
such insurance plan which provides the dual benefits of insurance and investment
into one. As a parent you can buy a child plan when the child is very young.
Child insurance plans are regular life insurance plans with an added benefit called
the 'Waiver of Premium'. This benefit states that if the parent, whose life is insured
under the plan, dies prematurely within tenure of the plan, the death benefits are
paid to the nominee or beneficiary immediately. Also, unlike other life insurance
plans it does not get terminated after the death benefit is paid out as the plan
continues to run till the end of the tenure without the future premiums to be paid.
How the child plan works
Therefore, you can take a child insurance plan and start saving solely for the purpose
of meeting various financial goals of your child, like – higher education, his other
expenses and marriage etc. while protecting him or her from unforeseen circumstances
that might arise in case of your sudden death.
There are few important features of these plans:
It provides death benefit to the extent of sum assured in case of untimely death.
It provides Safety to the family as no future premiums are to be paid post untimely
death and the plan benefits continue.
Your savings keeps growing as bonuses accrue and added to the plan.
Low premium paying term – Plans are available with 5 – 12 years of premium paying
term or you can even choose your premium paying term.
You can save from your salary by paying premiums monthly through ECS mode.
Staggered payments when you need it most – Your child need financial assistance
at various ages, when finishing the school, college admission, higher education
at graduation and post graduation level, and marriage.
You can choose a frequency from the plan which allows you to withdraw a fixed percentage
at a given frequency.
Reduced paid up benefits are allowed if you have paid premiums at least for 3 years.
In that case, the policy continues but on a reduced paid up basis and your sum assured
on death shall be reduced in proportion to the premiums paid. There will be no further
accrual of bonuses as well.
We have seen how the child plan of life insurance companies takes care of the various
financial goals of the child and also how it protects the financial future in case
of sudden demise of the parent. But, did you know that while the child plan protects
the future of your child, it also provides insurance tax benefits which save taxes
for you. Let us now see what are the benefits of taking a child plan?
Benefits under Section 80C of The Income Tax Act 1961 - the unique Insurance
tax benefits of having a child plan is that you can avail tax benefits of upto Rs
150,000 per year, under Section 80C of the Income Tax Act 1961.Therefore, you can
save upto Rs 45,000 (assuming you are in the highest tax bracket of 30%) in a year
on the premium paid on the child insurance plan.
Section 10 (10D) of The Income Tax Act - The other insurance tax benefits
is available on maturity proceeds received by you or your child or the nominee (in
case of your sudden death). The maturity proceed is also tax free under Section
10 (10D) of The Income Tax Act. Therefore, child insurance plan is one of the few
saving products, proceeds of which are completely tax free in the hands of the recipients.
Conclusion - We have many goals in life but protecting the future of our
child is the utmost one. We have discussed how child insurance plans help you meeting
these goals when you are around and also protect the children in case of any uncertainties
on your sudden demise.
The child plan continue even after the death of the parent without paying any premium
and pays the sum assured amount and other benefits again on maturity of the policy
or in a staggered manner as chosen by you. Thus, there is no such existing plan
that can compete with or match the benefits provided by a child insurance policy
as far as protecting the financial future and bringing up the child right way is
These benefits coupled with various insurance
tax benefits make this a unique choice for parents for protecting the future
of their children.