Ch. 2: Why Should You buy A Child Plan?

Once you have children, it is quite understandable that you have aspirations for them and want to fulfil all their dreams and goals. Maybe you want to accrue funds for their higher studies abroad, or you want to save up for a big wedding, or you simply want to accumulate money to take care of their future needs.

One of the best ways to secure their finances, both in your presence and absence, is by investing in a child insurance plan. It is a healthy blend of both insurance and investment, thereby helping you to create a fund that’s sufficient for this purpose. The child plan will give you enough returns to cover the milestones you have planned out and the insurance aspect will make sure your child is protected even in your absence. Its payouts can be customised to match their timeline, so they can pursue their ambitions without having to worry about the financial aspect.

It is quite advisable to invest in plans like these as early as possible to maximise the returns for your child’s future. Make sure you go through the policy wordings, T&Cs, and any other details before finalising the policy.

Why should I purchase a Child Plan?

To Accumulate Funds for your Child’s future!
With rising costs and inflation, it can get pretty hard to save up huge amounts for these life goals. But, it is also important to not risk your child’s future because of this. The main focus of buying a child plan is to secure their future, to ensure they don’t have to face any financial stress or have to give up on their goals.

A child plan helps you save money systematically and accumulate funds to take care of your child’s future needs, without causing any stress or burden to you or them. The amount that is accumulated by way of these policies can be used for heavy expenses like education and weddings. And, since it is a blend of insurance and investment, it gives you a nice cover which gives you sufficient returns and protects your child even in your absence.

Unique Feature of Child Plan

A unique and super helpful feature of a child insurance plan is that it does not lapse in case you pass away while the policy is active. The insurer waives off all future premiums and the funds continue to grow until the policy matures, and the insurer continues to invest in the policy. The child will be paid the death benefit immediately, and then assured payouts to cover all their milestones. At the maturity of the policy, the child is entitled to receive the maturity amount as a lump sum payout promised at the time of purchasing the child plan.

Your plans for your child remain intact, despite your absence. This is a unique feature that only child plans can provide. No other investment product provides you this benefit.

Partial withdrawal of funds

One of the best things about a child plan is that it aims to cover expenses holistically. This plan may offer partial withdrawal of funds, at any time, for situations like sudden medical emergencies, paying of school fees, minor accidents, or for the costs of a serious medical condition.

Some child plans may provide regular income to the child in the absence of their parents. It is equal to a certain percentage of the sum assured. This can be used to take care of school fees, medical bills, and daily expenses.

ULIP child policies generally have this feature.

Tax Benefits² of Child Plan

Child insurance premiums and returns are entitled to tax benefits. The nominee also benefits from tax-exempted life insurance payouts. Both premiums and payouts are exempted from taxation under the Income Tax Act, 1961.

• Premiums are exempted from tax under Section 80C of the Act, up to 1.5 lakhs
• Payouts made to the nominee/policyholder are exempted from tax under Section 10(10D) of the Act.

So, as seen in this article, a child insurance plan can be an extremely helpful and practical way of saving enough money for heavy expenses in your child’s life, whether or not you’re around. Costs are on the increase and things will get more expensive, which is why you should invest in such plans as early as possible to maximise your funds and secure your child’s future financially.