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What Are Child Education Insurance Plans

dateKnowledge Centre Team dateAugust 12, 2021 views117 Views
Buy the Best Child Insurance Plan | Child Education Insurance Plan

With the cost of higher education growing every year, providing them the best of everything is every parent's dream. A child's education and marriage require a lot of systematic planning. These are ordinary goal-based plans, and hence some amount of money demands to be designated each month.

For a good education fund, or for your child's higher education, you will need to plan something right; look for a fruitful mix of investment instruments and pay the needful amount at appropriate times.

For this you need to understand how child education insurance plans can help.

Child Education Insurance Plans: In Brief

Child Education Insurance Plans concern your security and savings demands to secure your children's future. Being a parent, one of the most important purposes would be to ensure that your children have a bright future and live their lives conveniently. These solutions can help you achieve that by saving for your children's higher education at a prestigious university.

With a Child Education Insurance Plan, you pay premiums for a particular term (monthly, half-yearly, yearly, or single pay). Once the policy term expires, you receive a lump-sum amount called the Maturity Benefit. Suppose an unfortunate event occurs during the policy term, the company extends your nominee the life cover sum.

The company further dismisses the future premium payments for the outstanding policy term to guarantee that your children's future is forever safe. This benefit is ready as long as all due premiums are paid.

Why do you Need a Child Education Insurance Plan?

A Child Education Insurance Plan is essentially a life insurance policy that extends protection and a platform for saving money to guarantee a protected future for your child.

It ensures that your child pursue the education they want with a lump-sum payout at maturity or when an unfavorable situation arises.

It serves as a security net to guarantee that your child's education does not get afflicted even if you are not around. In case of an unfavorable situation, your child will have the life cover.

Here are a few more reasons to invest in a child insurance plan.

5 Features of a Child Education Insurance Plan

Generally, Child education Insurance Plans offers the following features:

1. Lump-sum compensation

Some of the child insurance plans provide your children with a lump-sum gain in case of your demise within the policy term.

2. Waiver of premium

Your child won't be troubled with premium amounts as the company handles it on your account. Hence, the policy remains to survive.

3. Partial withdrawals

You can obtain your funds throughout the term in the form of partial removals, subordinate to limitations. This takes care of your child's various educational breakthroughs.

4. Tax benefits

Such a policy extends tax gains to the policyholder under section 80C of the Income Tax Act.

5. Loyalty addition and wealth booster

These plans may also extend loyalty addition and wealth booster advantages to assist you in growing your money without requiring you to spend extra money.

Two Types of Child Education Insurance Plans

There are various child insurance plans available in India. Buying the best child plan will help you in achieving the financial milestones that you have set for your children. To help you out, we have listed below two types of child insurance plans that are available:

1. Child ULIPS

A ULIP or Unit Linked Life Insurance Plan is an insurance policy that multiplies up as an investment. A portion of your money proceeds towards guarding your child, exactly like the regular child education insurance plan. The outstanding amount is funded in a mix of equity and debt.

Learn how to save for your child’s future by investing in a ULIP plan.

2. Child savings plans

Child Saving Plan enables the policyholder to fund in the plan externally any market uncertainty. It is a multi-faceted plan that offers life cover, maturity gains, and tax benefits, all in a single policy.

Child Education Insurance Plans – Myth v/s Reality

Myth 1: Child Education Insurance Plans cover a child's life. It is unpropitious to purchase insurance in the name of a child.

Reality 1: Many child education insurance plans guarantee the life of the earning parent and not the child. The advantage connected with child plans is that the child's future goals of seeking higher education are accomplished in case of the unfortunate demise of the parent.

Myth 2: Child Plan terminates if / when the parent dies.

Reality: The advantage of child education plans is that ordinarily, they offer a waiver of premium option, which the nominee can receive in an unfortunate death of the parent, the future owed premiums are waived off, and the policy continues. There is no influence on the gains due to being collected at maturity of the child plan.

Myth 3: The child insurance plan is fitting only for satisfying the education expenses for the child.

Reality: Child education plans are intended to take charge of the enormous expense of education for your child. Nevertheless, there is no constraint on utilizing the amounts obtained at periodic interludes throughout the policy term and maturity.

Example – If you funded a child's education plan for higher education, your child decides not to proceed with additional education and utilize the funds instead for other responsibilities. They may do such irrespective of the primary object it was designed for.

Myth 4: The Child Insurance Policy bars investment for a prolonged period.

Reality: Most utmost online Child Insurance Plans are adjustable when it appears to Policy Terms. The policy term of most excellent market-linked child plans ordinarily varies among 5 to 25 years. This suggests the earning parent can withdraw funds, both partly and entirely if wanted quicker than thought.

Choosing the best child education insurance plan is a wise decision you should make to ensure your child's safe and secure future, however from so many plans to choose from, it is pretty obvious for a person to feel confused this is where Canara HSBC Oriental Bank of Commerce Life Insurance comes to your aid. Providing the best Child Insurance Plans with exceptional benefits, we have indeed got you covered!

Plan your child's future today!

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Frequently Asked Questions (FAQs) for Child Insurance

Any parent with a child between 0-15 years should opt for a child insurance plan. It helps you deliver inflation-beating returns for the various needs of the child while he/she grows up. As a child grows up, his/her financial needs increase substantially.

The importance of a good education cannot be overstated. Without quality education, a child may not reach his/her full potential. But the rising cost of education can become an impediment in higher education. A child education plan ensures that you do not have to worry about the money for your child’s education. It is a mix of insurance and investment. A part of child education plan is used to provide the financial security of insurance, while the balance is invested in market-linked instruments. The investible portion delivers decent returns in the long run, helping you accumulate a corpus for your child’s education.

Child plans are tailor-made financial products designed to secure children’s future. Typically, child plans have two components—insurance and investment. The insurance component protects the child in case of the parent’s demise, while the investment helps in accumulating a corpus for the child’s needs such as education and marriage. Child plans have several features that are primarily aimed at financially securing children. Some of the features are:

  • Maturity benefit
  • Premium funding option
  • Partial withdrawals
  • Milestone payments
  • Various investment funds
  • Protection of returns

The right time to buy child plans depends on the financial goal and the type of policy. Child insurance policies are long-term instruments and to generate decent returns it is advisable to invest as early as possible. You can invest in child insurance policies even before the child is born. Child education policies are relatively short-term policies. Child education policies can be chosen according to the financial goal. You can invest in child education policy as soon as the child is born if you plan to fund his/her primary and secondary education through the policy. If the aim is to accumulate funds for the higher education of the child, then you can invest at a later stage. In any case, it is not advisable to invest after the child has turned 15.

Child plans are meant to build a financial buffer for your child’s future needs, so, it is important to have a fail-proof plan. A few things to consider while buying child plans are:

  • Goal: It is pertinent to have a clear goal in mind as it determines the type and tenure of the policy. You should invest in a child plan as soon as the child is born. Starting early gives your investment to grow and helps you prepare better for your child’s needs. Similarly, selecting a long-term policy protects your child for a longer-term.
  • Premium waiver: While buying a child plan, it is mandatory to check if the premium waiver facility is available or not. Not having a premium waiver option can leave your child vulnerable in your absence.
  • Inflation: When you are investing for the long term, external factors like inflation cannot be ignored. Invest in ULIPs to generate inflation-beating returns. Invest 4G plan offers customers an option to choose from seven different funds with varying degrees of exposure to equity.
  • Bonus component: Along with the basic benefits of a child plan, insurance companies also offer additional benefits. Even though these benefits are small, they could add value considerably in the long run. For instance, Invest 4G plan provides benefits such as wealth boosters, loyalty additions and return of mortality charges.

The eligibility to open a child education plan is similar to a child insurance plan. The entry age is generally between 18 and 65 years. The maturity age is between 23 years and 80 years. You can start investing in a child education plan with Rs 5,000 per month or Rs 50,000 per year. The policy tenure varies between 5 years and 30 years.

There is no universal minimum instalment for a child education plan. Every insurer has its own minimum limit, even different plans have a different minimum limit. Invest 4G plan has a minimum limit of Rs 5000 if you choose to pay monthly premiums. The minimum premiums for quarterly and half-yearly payment tenures are Rs 15,000 and RS 30,000, respectively. In the annual mode, the minimum premium is Rs 50,000.

Child education plan can either be unit-linked or non-linked. The interest rate of ULIPs is determined by the fund chosen by the policyholder and the performance of the market. The interest rate for non-linked child education plan is decided by the insurance company.

The policy for premature closure of child education plan deposit differs from insurer to insurer. Some insurers allow premature closure of child education plan deposit. If the account is closed before the lock-in period expires, the fund’s value minus the surrender charges id deposited in the discontinued policy fund. The amount earns a minimum of 4% interest and will be paid to you after the lock-in period gets over. It the policy is surrendered after the lock-in period, the total fund value minus the surrender charges will be given to you. But premature closure of child education plan can be fraught with risks and you may not achieve the stated aim. Invest 4G plan allows you partial withdrawals without surrendering the policy, which essentially disincentivises premature closure of the policy.

Child education plans come with flexible payout options. You can either set up a standing instruction for instalment payment when you buy the policy or inform the insurance company during the policy tenure. Insurance companies generally accept requests for instalment payment a few months before the maturity.

One of the defining features of child education policies is the partial withdrawal facility. Most insurance companies allow partial withdrawal from child education plans to take care of liquidity needs. Invest 4G plan allows partial withdrawal after the 5th policy year.

You can avail a secured loan against a child education plan. The loan can be used to fund the higher education of the child.

Child education plans are like child insurance plans with some slight differences. Child education plans have relatively shorter tenures than child insurance plans. Child education plans have milestone payments coinciding with the educational stages of the child. These plans have a limited scope and are not dynamic products like child insurance plans.

When you buy life insurance, the insurance company asks for the nominee details. Only the person named as the nominee in the policy can cash out a life insurance policy in case of death of life insured.

Child education plan not just secures the financial future of the child but also provides tax benefits to the policyholder. The premiums paid for child education plan are eligible for tax deduction under Section 80C of the Income Tax Act. The maturity amount is also tax-exempt under Section 10(10D) of the income tax law.

While there are several child plans in the market, the Invest 4G plan is the best of the lot. Invest 4G with its unique proposition provides all-round protection to your child. With the online ULIP plan , you can decide the premium payment tenure and also the settlement option.

You can invest in a number of financial products for your child’s education. If you need a long-term savings instrument, the PPF is an eligible option. But if the child’s education is the sole aim of your investment, nothing is better than a market-linked scheme. Market-linked investments, especially equity investments tend to perform better in the long run. Investment in market-linked schemes can ensure handsome returns on your savings by the time your child grows up. Opt for Invest 4G plan to give your child a secure educational future.

Getting insurance required a visit to the bank or the insurer’s branch earlier. But with the popularity of online ULIP plans, getting an insurance plan has become extremely easy. You can buy a host of insurance products directly from www.canarahsbclife.com and get discounts on the premium from the company.

While the cost of insurance depends on a host of factors such as tenure, coverage and the mode of payment. With Invest 4G plan, you can start investing for the financial future of your child with just Rs 5,000 every month. However, if you are not clear about the cost of insurance for your child, you can use the ‘life insurance calculator’ in the ‘tools and calculator’ section of www.canarahsbclife.com. Similarly, you can use the ‘child education planning calculator’ to get an idea of the cost of child education plans.

Considering the flexibility in the premium payment tenure and the payout settlement, Invest 4G is the best scheme for the child. The Invest 4G plan also provides the premium funding option which ensures the financial stability of the child even in the absence of the policyholder.

To choose the ideal child insurance plan, you will have to start with planning the various stages of the plan and your child-specific milestone payments.

  • Paying capability: Just investing in a child insurance plan is not enough, you will have to pay the premiums regularly and timely to keep the policy active. Make a correct estimate of your paying capability and decide the premium payment frequency.
  • External factors: While buying a child insurance plan, consider the external factors such as inflation and interest rates before finalising the maturity benefit.
  • Premium waiver: The premium funding facility is a crucial feature for the success of the child insurance plan. Not having the premium waiver facility can leave a costly chink in your child insurance armour.

To choose the ideal child insurance plan, you will have to start with planning the various stages of the plan and your child-specific milestone payments.

Having life insurance has become a necessity and the earlier you buy one the better. Life insurance plans are cheaper when you are young. Moreover, when you are buying products such as ULIPs that have an investment component, having a long policy tenure helps in compounding your savings.

Most insurance companies have started offering online policies. You can either pay through offline mediums or opt for online ULIP plans. Buying insurance policies online is cheaper and hassle-free. The premiums can easily be paid through the website or mobile app.

There are three major rider benefits provided with child insurance plans.

  • Premium waiver benefit
  • Accidental death and disability cover
  • Critical illness cover
  • The frequency of the payout is decided by the policyholder while buying the insurance plan. Even if you fail to define the frequency of the payout while buying the policy, it can easily be rectified during the policy term.

    You can appoint a minor as nominee for your plan, but you will have to nominate an appointee who will have to give his/her consent to act as an appointee. The appointee will cease to hold power once the minor nominees become majors. In the event of a claim, of your nominee is minor and you did not name an appointee, the proceeds will go to the legal heirs.

    No child should give up on his/her dreams to study in premier institutes like IIT and IIM due to financial constraints. With the rising cost of higher education, investing in a child plan has become extremely important. Child plans help you save in a disciplined way for a secure financial future of your child.

    Canara HSBC Oriental Bank of Commerce offers a plethora of child plans to take care of varied needs. With unique features such as fund switching, premium redirection, change in sum assured and return of mortality charges, child plans from Canara HSBC provide unprecedented coverage.

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