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Every parent in this world wants to shower their children with everything they have, and then some. Planning for children’s future actually starts right from when the child is born, so that the investment can grow alongside the kid and be ready for when your child needs it. If you are thinking about setting up a similar corpus for your child, then consider a child education plan.
This type of plan is usually a mix of insurance and investment for your child’s future as well as his financial security. A child plan is that safety net, which reassures your child that his future career goals and dreams have already been taken care of by his parents.
With this plan, you can allow your children to dream big and aim high, without worrying about finances in the least. What’s more? If the policyholder is no more, then the child gets 100% of the sum assured, which ensures that his future and finances are secure and that he is taken care of even in your absence.
Here are some benefits of a child education plan, which make it an ideal choice for parents:
1. Save For Your Children’s Goals
If you start investing right away, while your child is still young, you won’t have to worry about funding his career goals when he/she goes to college. The accumulated corpus that this child plan can offer will alone be able to manage the hefty college fees.
Towards the end of the policy term, as chosen by the parents, the child then gets the maturity benefits that he can use towards achieving his goals and turning his dreams into reality.
2. Flexibility To Add Riders Or Add-Ons
You may think that you have narrowed it down to the best child education plans there are; however, it would be advisable to still take a quick look at all the riders these policies offer. You can find different riders like personal accident insurance, accidental deaths, rider benefit and even waiver of premiums that were paid during the policy term.
3. Protect From Unforeseen And Untimely Circumstances
One of the major benefits of this is the financial cover that your child gets, which activates in case of the untimely death of a parent. The insured child can claim 100% of the sum insured, and this policy continues to provide higher education expenses for the child as the maturity amount is ten times the premium paid by the policyholder.
Different types of life insurance policy or term plans can also offer financial coverage as well as survival benefit to the policyholder. This way, you can guarantee that your child’s dreams always have the wings they deserved, even in your absence.
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4. Partial Withdrawals
If need be, then you can withdraw a partial amount from your child plan to fund a specific course, learning something new, or anything else that was not accounted for earlier. Certain child plans also offer periodic payouts, which can help you encourage other talents your child possesses with the money you receive from this plan in regular intervals.
5. Be Wary Of The Loss Of Capital
To keep turning with turning tides, i.e., to keep adapting to market fluctuations, you can opt for a dynamic fund allocation strategy that allows you to reallocate your funds even after the policy has been bought.
Alternatively, you can choose a Systematic Transfer Plan for your children education plan because STPs allow you to switch to a different fund unit during volatile markets, helping you save your investments from capital loss.
6. Fund School Fees, College Expenses
In the event that the parent who has purchased the child education plan dies, then the insurance company makes it a point to immediately roll out a percentage of the sum assured, which can help the other parent pay off school/college fees and ensure that education never gets hampered.
Additionally, a certain percentage of the sum assured is then also paid on an annual basis till the end of the policy term to ensure that your child’s education is taken care of even in your absence.
7. Tax Benefits On The Child Education Plan
According to the Income Tax Act of 1961, the premium paid on these plans is eligible for a tax deduction of up to Rs. 1,50,000, under section 80C. Besides this, you can also avail of a tax benefit on the sum assured, i.e., the maturity amount of this plan, under section 10(10D).
The government has its own income tax calculator, which allows you to calculate your taxes for every financial year in advance. Moreover, you can check out the calculation based on the old tax regime and the new tax regime as well.
Arranging funds for your child’s education well in advance is very crucial and factoring in the current rate of inflation, it is best if you get started at the earliest. Be financially prepared for anything your child desires and give their dreams a kick-start by planning their finances right away.
