Everything you should know about a child plan

 Everything you should know about a child plan

Every parent has the biggest dreams when it comes to their children. However, with the cost of education, among other necessities, growing at an alarming rate, being apprehensive and overwhelmedis only completely justified. Protecting their future, therefore, becomes a priority so that their dreams are not jeopardised. In this regard, a child plan is an effective means to prepare for your kid’s future.

So what is a child plan?

Child Plan or Child Insurance Plan is a special plan in which the parent acts as the policy owner, but the beneficiary is the child.It offers the dual benefit of investment as well as life insurance. This is because while securing the child’s future, you simultaneously end up accumulating an investment corpus that issufficient to cover the major milestones in the child’s life.

What benefits can you expect from child investment plans?

Child investment plans have a host of benefits associated with them. They are ideal for creating a corpus for your child’s education. Apart from this, you can withdraw partial funds to address a financial emergency that may arise. Some child investment plans also come with an option to waiver the premium in case of the death of a parent. This ensures that the child is financially protected even in the absence of a parent. Lastly, in case of child-related borrowings, the child plancan be used as collateral.

What types of Child investment plans can you invest in?

There are two types of child plans- Unit Linked Insurance Plans (ULIP) and Endowment plans.

Unit Linked Insurance Plans (ULIP)- These plans help you invest your money in the markets, based on your risk appetite, and allow your funds to grow. The best part about child ULIP plans is that they generate returns that are inflation-adjusted.

Endowment plans- Endowment plans or Child endowment plans are ‘saving’ instruments that offer you fixed and guaranteed returns. 

Depending upon your risk appetite, you can select the type of child plan that works best for you. Use a child plan calculator to figure out the exact amount you would need to invest to take care of your child’s future with ease.

What are the pay-out options like?

Depending on your preference, you can either opt for a lump sum or a regular pay-out. So how do they work? Lump sum payments are ideal for addressing long term goals that need a significantly large fund in one go, such as your child’s higher education or your child’s wedding. On the other hand, regular pay-outs are designed to cater to the intermittent needs with ease, such as the admission fees of your child’s new academic sessions, or the course fees for a new skill they are looking to take up.

Planning for the different milestones in your child’s life is critical as it is time bound and has a sense of urgency with regard to the need for funds. Such as in the case when your child graduates from high school and is seeking admission in a college of their choice. The substantial amount of moneyrequired at that point to timemight be difficult to pool together in one go. Having invested in a child plan well ahead of such milestones ensures that they do not have to sacrifice their dreams for thelack of funds. Also, with the provision of waiver of future premium option, in case of the demise of the policy holder, you ensure that even in your absence your child’s needs and desires are protected and they can live life on their own terms. 

Paul diverson