Nuclear families, rising middle-class ambitions, rising education costs, lifestyle illnesses, and the possibility of developing diseases all combine to make insurance a multifaceted financial cushion. Volatility, Uncertainty, Complexity, and Ambiguity (VUCA) have made people’s lives and lifestyles more susceptible than ever before.
A life insurance policy can be a reliable source of money for old age, financial assistance for a child’s education, or even a source of income in its own way. When a family has a crisis, the youngster is generally the most impacted family member since their schooling suffers. Traditionally, the underlying principle of every life insurance policy has been risk minimization against loss of life.
As a parent, your first responsibility is to protect your child’s future, and investing in a child insurance plan is an excellent place to start. A child insurance plan not only provides the safety net you want for your child, but it also provides the rewards of investment.
A child education insurance policy can help to limit risks, allowing education to continue uninterrupted. Child insurance policies can assist you in ensuring this continuation. This child life insurance policy has a single purpose to help your child achieve their goals even if you as a parent aren’t there to do so.
5 Reasons to Invest in a Child Insurance Plan
Investing in the right child insurance plan is vital because it will help your child for their future growth in your absence. Therefore, always select a plan that aptly includes all the necessities your child would need.
As discussed above, investing in an inclusive child insurance policy is very important, and the following are the reasons to consider one:
- A Financial Cushion For Your Child’s Education
- Inculcates Savings Habit in You
- Tax Benefits
- Coverage Against Disability or Any Mishaps to the Policyholder
- Collateral For Your Loans
A Financial Cushion For Your Child’s Education: Any parent’s primary concern about their child’s future is the rising cost of education in today’s world. Excellent education for your child will not be cheap. Furthermore, as the years pass, your child may opt to pursue higher education, which will be pretty expensive. As a parent, your financial load will be alleviated if you plan ahead of time and invest in a child insurance plan that matures during these years.
You can invest in 2 types of plans for your child insurance:
- Unit Linked Plans or ULIPs
- ABSLI Vision Star Plan
ULIP plans allow you to invest in an equity fund systematically. Profit from the market’s performance. It also allows you to invest in debt funds at the same time. As a result, you may not only limit your investment risk with equity funds but also maintain the corpus you have built safely in the last few years of your investment.
You can also invest in the ABSLI Vision Star Plan. This child insurance plan from Aditya Birla Sun Life Insurance offers regular assured payouts for financing your child’s education and safeguarding your child’s future even if you are not present, as well as complete financial protection.
Inculcates Savings Habit in You: Investing your hard-earned money in a child insurance plan will not only provide financial security for your child in moments of crisis but will also assist you in instilling a saving habit in your child. Committing to investing in a child insurance plan would help an individual develop the practice of disciplined savings. As previously stated, child care plans provide both insurance and financial opportunities.
Thus, before purchasing a child care plan, return to your financial plan and evaluate the demand for finances at each stage of life. Calculate your savings for things like primary and secondary schooling, higher education, marriage, and so on.
Tax Benefits: Section 80C of the Indian Income Tax Act allows you to deduct premiums paid into child insurance plans up to Rs. 1.5 lakhs. Furthermore, the maturity value and any partial withdrawals made after the lock-in period are tax-free. It is done primarily to encourage policyholders to enroll in a child insurance plan and to ease the financial stress resulting from it.
Furthermore, another advantage of a child insurance plan is that you can reinvest the money you saved on taxes. Section 10 of the Internal Revenue Code exempts child insurance plans from paying taxes on maturity payouts and capital gains (10D).
Coverage Against Disability or Any Mishaps to the Policyholder: The uncertainty that life presents from time to time can be one of the most challenging obstacles that a parent can face. If you have a severe impairment, it will negatively influence your ability to work and earn the same amount of money. A child insurance plan can help mitigate these risks by covering all future premiums, ensuring that a child’s education is not affected.
Thus, the ABSLI Vision Star Plan includes a Death Benefit, which means that if the life insured dies during the policy term, a predetermined death benefit would be paid to your nominee. Once the death benefit is paid, the policy will be dissolved.
Collateral For Your Loans: Higher education is expensive, especially if your child wishes to study abroad. Despite considerable scholarships granted to deserving students, there will always be a gap in money that must be self-financed. Banks and non-banking financial companies (NBFCs) will only make education loans with substantial collateral and a co-signer. Insurance policies are ideal for investments because they provide milestone-based payouts and serve as credible collateral for loans.
With a child insurance policy, you may obtain a loan from the insurer. After the lock-in period, the policy begins to accrue cash value (surrender value). As you continue to invest in the policy, its surrender value rises. So, you know, you need money for the child’s education before the policy matures; you can avail of a loan on the policy.
FAQs About Child Life Insurance Queries: Answered!
What Is a Child Life Insurance Policy Cover?
If the policy is active, a child life insurance policy will cover the untimely death of the life assured, which means the untimely death of the parent. A death benefit is paid to the child/nominee. In your absence, the child will be able to meet their financial obligations. You can ensure that your child has the opportunity to live a quality life that you would have provided for them by purchasing a child life insurance policy.
How Do I Calculate the Sum Assured on My Child’s Life Insurance Policy?
Before purchasing a child life insurance policy, you must evaluate your child’s future financial requirements, such as schooling expenses and everyday expenses, as well as your current lifestyle, financial liabilities, and so on. It is generally advisable to select a sum assured/coverage amount sufficient to cover your child’s future needs.
When Should You Start Investing in a Child Life Insurance Policy?
If you want to invest in child life insurance, you should do so as soon as possible. It is wise to begin investing in child insurance as quickly as feasible. It allows you to build a significant corpus that will assist you in meeting your child’s future financial demands.
You can safeguard your child’s financial stability in attaining their future ambitions even if you are not around by investing in a child insurance plan. Investing in a substantial child insurance policy is wise for any parent who wants to protect their child’s future financially. It makes no difference how much an individual begins saving; the goal should be to begin saving as soon as possible so that they may secure a positive return in the long run.