Child Education Plans

Tax Benefits on Child Education Plan

Types of Child Education Plans

1. Child Unit Linked Life Insurance Plans (ULIPs):
   • As a parent, providing the best education for your child is a top priority. Relying solely on savings may fall short for meeting the diverse expenses associated with esteemed national or prestigious foreign education. Market-linked child plans, such as ULIPs, offer a solution to create necessary funds for fulfilling your child’s educational ambitions.
2. Capital Guarantee Solutions:
   • If you seek a secure and reliable investment option for your child’s future, capital guarantee solutions are a fitting choice. These plans assure the protection of the initial invested capital, regardless of market fluctuations or economic uncertainties. This ensures the safeguarding of the principal amount invested for your child, irrespective of financial market performance.
3. Guaranteed Return Plan (Traditional Plan):
   • Guaranteed return child plans are tailored to provide assured returns on investment along with insurance coverage for your child’s future. Offering a secure method to accumulate funds for education or other milestones, these plans differ from market-linked ones by providing a predetermined rate of return throughout the policy term. This certainty allows you to plan your child’s future with a clear understanding of the exact amount to be received at maturity.

How Does a Child Education Plan Work?

Illustrative Example: Mr. Sharma, a 40-year-old professional, invests in a child plan for his daughter’s higher education. Payment options include lump-sum, annual, half-yearly, or monthly premiums. Consider the following figures for calculation:

• Current age of the child: 10 years
• Invested amount (monthly): Rs. 10,000
• Investment period: 10 years
• Withdrawal after 20 years
• Rate of return: 19.93%*

If Mr. Sharma outlives the policy term, the maturity amount is Rs. 1.72 Cr*, considering an approximate 6% inflation rate. In the unfortunate event of Mr. Sharma’s death in the 7th policy year, his daughter still receives life cover benefits, a waiver of premiums, and a monthly payout based on the plan terms.

*The rate of return is subject to market performance.

What is Life Cover and its Importance in Child Plans?

Life cover in a child plan serves as a financial safety net for your child in case of your untimely demise. It provides a lump sum amount to the beneficiary, usually the child, to meet financial needs such as education, marriage, and other expenses. The significance of life cover in child plans includes:

1. Financial security for your child:
   • In the event of your death, life cover offers a financial cushion for your child to meet their needs, ensuring they can pursue their life goals even without your financial support.
2. Peace of mind for you:
   • Knowing that your child is financially secure in case of your demise provides peace of mind, allowing you to focus on other aspects of your life, such as your career and family.
3. Affordability:
   • Life cover in child plans is relatively affordable, offering long-term benefits. You can select a life cover amount that aligns with your budget and your child’s needs.

How Much Should You Invest in Child Education Plans?

The amount to invest in a child plan depends on factors such as your financial situation, goals, and the cost of education. Starting early is recommended to leverage compounding growth. A general guideline is to save at least 20% of the estimated cost of education. Consider your income, financial obligations, and the time until your child starts education when setting a realistic budget. Use a Child Plan Calculator to understand your investment requirements.

How to Buy a Child Education Plan From Policybazaar?

Follow these steps to make an informed decision and choose the best child education plan:

1. Visit the ‘Child Plans’ section on Policybazaar’s website.
2. Fill in details like Name and Mobile Number.
3. Click on ‘View Plans.’
4. Enter required information:
   • City of residence
   • Your age and your child’s age
   • Your annual income
5. Browse and compare child education plans from different insurers.
6. Customize your plan based on investment amount, duration, and withdrawal terms.
7. Choose the preferred child plan and proceed to payment.

Policybazaar offers benefits such as extra payouts, transparency, expert advice, and recorded calls for honest selling.

How to Choose the Right Child Education Plan?

Consider these key points when selecting a child education plan:

1. Look for Triple Benefits:
   • A child plan with life cover, waiver of premiums, and monthly income for the child provides comprehensive protection.
2. Check for Partial Withdrawal Options:
   • Opt for plans offering partial withdrawals, allowing financial preparation for different stages of your child’s life.
3. Reputation of the Insurance Provider:
   • Choose financially stable companies with a favorable claim settlement ratio for reliability.
4. Plan Flexibility:
   • Select child education plans offering flexibility in premium payments, policy terms, and coverage.
5. Diverse Investment Fund Options:
   • Market-linked plans with various fund options (debt, equity, or a combination) cater to different risk appetites.

Starting early in your child’s investment journey yields greater benefits, allowing for a larger corpus and more financial freedom.

What is the Child Education Plan Claim Process?

The claim process for child plans involves the following steps:

1. Informing the insurance company:
   • Immediately inform the insurer about the incident, providing necessary details through customer service or claims department channels.
2. Documentation:
   • Submit required documents, including claim form, policy document, medical records (if applicable), proof of identity, and incident-related documents.
3. Submitting the documents:
   • Submit all documents within the specified timeframe, keeping copies for your records.
4. Verification and assessment:
   • The insurance company reviews and assesses the claim, conducting investigations if necessary.
5. Claim settlement:
   • Upon approval, the insurer processes the settlement, paying the policyholder or nominee based on plan terms.

Advantages of Early Planning for Your Child’s Education:

1. Save more over time:
   • Starting early allows compound interest to work, enabling your money to grow over time.
2. Reduce financial stress:
   • Gradual savings buildup eases the burden of keeping up with rising education costs.
3. Have more options:
   • Early planning provides time to explore various educational options, qualify for financial aid, and secure scholarships.
4. Teach financial responsibility:
   • Early savings instill the importance of saving and future planning in your child.
5. Give your child a better chance at success:
   • Planning early ensures financial resources for a good education, enhancing your child’s prospects for success.

Conclusion:

Child Education Plans are a strategic approach for parents to secure their child’s future education. Early planning ensures that your child’s educational aspirations are supported, even in the face of unforeseen challenges. These plans not only save money but also offer the gift of education without financial concerns, making sure your child’s dreams have the necessary support to become reality.