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Child Insurance Plans - When and How to Start Planning?

dateKnowledge Centre Team dateFebruary 08, 2022 views100 Views
Child Insurance Plan | Child Investment Plan

Your child is one of the greatest blessings you receive in your life. But with all the joys comes a huge responsibility as well. Your child is dependent on you and you have to ensure that they have all that is needed.

With the costs ever-increasing due to inflation and other policies, only savings is not enough. You have to make sure that your corpus grows steadily and is enough till your child attains the age where this money is needed.

Also, life is so uncertain, it is impossible to predict what may happen to you. You need to be prepared for every outcome, even for the time you are not present with your family.

Child insurance plans are the type of life insurance plans that also offer you an opportunity to invest in the market. These plans are also referred to as child investment plans and help in financially securing your child’s future by enabling you to create a sufficient corpus that can be used to meet your child’s goals.

When do you Need Money for your Child?

You must have a lot of dreams regarding your child’s future. Every parent wants to do the best that they can to help their child achieve their goals. Some of these goals are:

1. Higher Education

This is one of the major goals that you may have for your child. Achieving higher education requires a lot of money. Education costs are increasing every year. Costs of popular courses such as MBA, Law, Medicine are rising at the rate of more than 10% every year.

For example, currently, if your child wants to pursue MBA from a reputed college, it will cost you around 20-25 lakhs. This cost is expected to further surge.

2. Marriage

After higher education, the next goal or milestone to achieve is marriage. Sooner or later, your child will be getting married and start his family. Marriages, in India especially are a big and expensive affair.

3. Other Expenses

Marriage and education are not the only things that you need money for. Various other expenses are incurred in raising a child, though they are not as big but can accumulate to a considerable amount.

These can include things like school fees, daily expenses, health expenditures of a child, travelling, clothes, etc.

How does a Child Insurance Plan Help your Financial Needs?

A child insurance plan includes the benefit of both investment and insurance. Thus, the best investment plans for a child can assist you in meeting all the above-stated goals. Here’s how

1. Multiple Asset Class Options

This is one of the major benefits of a child insurance plan. It allows you to invest in market securities and grow your corpus. Through your child investment plan, you can invest in various asset classes as per your preference and risk-taking ability.

The various classes you can invest in this plan include

a. Equity Funds
b. Debt Funds
c. Liquid Funds
d. Hybrid or Balanced Funds

2. Portfolio Management for Aggressive Investors

Plans such as Canara HSBC Life Insurance’s ULIP, Invest 4G offers you multiple portfolio management strategies. Portfolio management includes some pre-defined rules that work in a set manner. Opting for this helps you to manage your fund easily without too much intervention.

Choosing which fund to invest in and answering questions such as when to get in the fund, when to exit, requires a lot of knowledge and thus can be a time-consuming process. However, portfolio management removes this trouble from your life and takes care of your investments.

3. Partial Withdrawal

This refers to withdrawing a certain sum from your accumulated corpus. A child insurance plan allows you to withdraw a part of your money from the fund. This can help you a lot in times of financial emergency. With the help of a partial withdrawal facility, you do not have to ask for loans, you can just use your policy.

4. Maturity and Death Benefit

A child insurance plan involves both maturity and death benefits as the need arises. If you die during your child investment plan, a sum assured that you decide at the time of purchasing is given to your family.

If you survive the policy, the value of your fund along with the bonuses (if any) will be given so that you can help your child in achieving his goals.

5. Choice of Pay Out

With child insurance plans, you have the freedom to choose the choice of your pay-out. A pay-out is the amount you will receive after the maturity of the policy. You have the following two options to choose from

a. Lump-Sum

In this option, all the money and the benefits will be provided at once and the policy will terminate. This is the most popular choice

b. Regular Income

If you do not want to receive the amount as a single payment, you can opt for the instalment option. In this option, the payout will be given in the form of regular payments.

Child Insurance Plans from Canara HSBC Life Insurance

Here are some child insurance plans from Canara HSBC Life insurance that can help you do the best for your child.

1. Smart Junior Plan

This is a perfect child insurance plan that is specifically designed to cater to child needs such as education. This plan gives out guaranteed payouts that you will receive annually to take care of your child’s education.

Smart Junior Plan | Child Insurance Plan

a. Select the investment term and policy term
b. Start investing as per the frequency most comfortable for you
c. Enjoy annual tax deduction benefit under section 80C for investment up to Rs 1.5 lakhs
d. Enjoy regular annual bonuses, that will further boost the value of your fund
e. In the event of your early demise:

  • Your family will receive the sum assured immediately
  • All the remaining premiums will be waived off by the insurer
  • Your child receives the maturity value later
f. Maturity benefits are exempt from tax under section 10(10)D of the Income Tax Act 1961.

2. Invest 4G

This is a unit-linked insurance plan to help you create enough wealth for the future for your family’s benefit. Here’s how you can use Invest 4G for your child’s plan:

a. Select investment tenure and plan term along with premium protection benefit
b. Select your asset mix – equity, debt, hybrid funds
c. Start investing regularly at a frequency comfortable for you
d. Enjoy a tax deduction under section 80C for investment up to Rs 1.5 lakhs
e. Invest regularly and enjoy market-linked growth and bonus additions
f. In case of your early demise:

  • Your family receives the death benefit immediately
  • The life insurer will invest the remaining premiums
  • Your child will receive the funds at the intended maturity
g. Policy automatically saves your equity fund growth by transferring equity fund units to liquid funds systematically
h. The policy allows partial withdrawals after the lock-in period of five years
i. You can also opt for a systematic withdrawal at the end of the policy term

Start Early for a Brighter Future

There is no set period at which you should start planning. The only answer is to start planning as early as you can. That is, as soon as you become a father, you should start planning for your child. With long-term investment plans like Invest 4G and Smart Junior Plan, you may not even have to worry about changing your investment for the next 15-20 years.

This is a long enough period for you to build a huge corpus with your small regular savings for your child.

Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised to exercise their caution and not to rely on the contents of the article as conclusive in nature. Readers should research further or consult an expert in this regard.

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