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Best monthly saving schemes for child's education

dateKnowledge Centre Team dateJanuary 28, 2021 views190 Views
Best monthly saving schemes for child's education

Even though inflation may be down to zero, an average Indian household's expenditure is climbing at a feeling of great peace. The cost of education is already peaking and is rising at 12% every year. Currently, the average course fee of a BTech student is ₹6 lakh. The cost will only increase in the upcoming years, and by 2027, it will touch a whopping ₹24 lakh. Now, with the current scenario, Indian parents are worried about their child's higher education. The question of whether they will be able to fund their child's education remains unanswered. Well, they can if they plan in the right manner with the right approach. The best and the most obvious thing you can do is begin to save from an early life stage.

By starting to invest in life insurance, you can save a big sum of an amount and gain the power of compounding. When you invest in the best monthly saving scheme, you yield good results at the end of it. Having an early start is not always enough. You should also know where to invest right to receive the optimum returns. However, a delayed start in investing for your child's education will not only yield a small sum of money but will also impact your other financial goals. You're likely to fall short of the required amount if you begin the investment in your 40s. To understand this better, let us walk through the best monthly saving schemes.

What is a Child Insurance Plan?

You cannot overstate the value of good education. A child cannot reach his/her full potential without quality education. Moreover, the regular hike in education can be the cause of impediment in higher education. However, if you invest in a child education plan, it will ensure your child's education's financial aspect. The child education plan is a combination of insurance and investment. Some part of the plan is for providing the financial security of the insurance, and the balance is an investment in market instruments.

Child Insurance plans are a part of child-specific financial policies, which mostly includes child education plans. The plans focus on paying the life cover as a lump sum amount during the end of policy duration. Apart from the lump sum payout, the plans also come with regular payments during a child's education's important milestones. Generally, the child insurance plans can be customized as it comes with several options to add various riders. It thus improves the plan according to the child's specific requirements.

Now, let us talk about the various features of child insurance plans:

Premiums

You can pay the premium as a lump sum at the beginning of the policy or in a specific period. The bank will give you multiple options to pay the premium: monthly, quarterly, half-yearly, and annual basis. The premium amount is dependent on the assured sum and the expected returns.

Policy Tenure

Typically, the policy tenure of a child insurance plan varies from 5 to 30 years. You can select the tenure from the birth of your child to a predefined age.

Sum Assured

Besides maturity benefits, child insurance plans provide a life cover. According to the general thumb rule, the assured sum should be over ten times the annual income.

Maturity

It is the most important feature. Since child insurance plans are invested in keeping a particular goal in mind, it will defeat the policy's purpose if the maturity amount falls short. Thus, while investing, you should consider various factors like interest rates and inflation.

Segmented pay-outs

The segmented payouts will take care of the child's financial needs, such as education when required. For example, the Canara HSBC Oriental Bank of Commerce Life Insurance gives the option of receiving the maturity amount in instalments, and the policyholder chooses the frequency.

Premium Waiver benefit

On the off chance that the policyholder passes away in the stipulated time, the beneficiary will receive the sum assured. The insurance company will continue to pay the rest of the premiums till maturity.

Riders

Child Insurance Plans have multiple riders. The child plan covers the illness, premium waiver option, and accidental death cover. The premium waiver option is sometimes an in-built feature of child insurance plans. The critical illness cover secures against a particular set of terminal diseases, and the accidental death cover gives an additional amount in case of accidental death of the policyholder.

Partial Withdrawal Clause

This feature is provided with the child insurance plans to manage the sudden requirement for liquidity.

Choice of Funds

A part of the premium of the child insurance policy is used as an investment in market-linked assets. The insurance company allows the policyholder to opt from different funds. The funds are invested in debt, equity, or money market instruments.

Types of Child Insurance plan offered by Canara Oriental Bank of Commerce Life Insurance:

Invest 4G

This plan is complete protection and saving centric. This Unit Linked Insurance Plan offers you the opportunity to save for your future goals and dreams. It also provides you with a choice to opt for protection as per your suitability. It maximizes your savings by adding Loyalty Addition and Wealth Boosters, which returns the Charges of Mortality on policy maturing. Invest 4G is a savings cum protection plan that can help you secure your life goals.

Smart Future Plans

This plan is a unit-linked insurance plan providing you investment opportunity for the long term to fulfil various family needs, such as ensuring a bright future for your young ones or gathering assets. This is a comprehensive insurance cover that implies that there is the sum assured on death and Premium Funding benefit on death or disability. It ensures that the plan you selected for your family remains unaffected even if any unfortunate incident takes place.

Jeevan Nivesh Plan

Every person works hard to provide our loved ones with the best things in this journey of life. In this case, it is your child's education. To fulfil it, you need to structure your financial planning. To stay prepared, you can invest in the Jeevan Nivesh Plan.

Future Smart Plan

It is a unit-linked insurance plan that will provide the parents with a long term investment opportunity to build a bright future for their child. In case of any unfortunate event, the insurance will comprehensively cover everything to ensure your child's future stays unaffected.

Money-Back Advantage Plan

You should be financially empowered during every sphere of life, and in this case, it's your child's education. The Money Back Advantage Plan will provide financial help to your child by offering life cover and the milestone based on payouts via guaranteed money back payouts and maturity benefits.

Smart junior plan

With the Smart Junior plan, you can benefit from guaranteed payouts in the last five years of the policy. You can rightfully align it with your child's education pivot points. Moreover, the plan also gives you an annual and final bonus on maturity, if applicable. Also, the plan gives your child comprehensive protection if any unfortunate incident happens with life assured.

Why do you need a Child Insurance Plan?

There are three basic reasons you opt for the best monthly saving scheme for your child's education. The reasons are as follows:

Future expense:

Many people think of figuring out a proper plan for their child's education but many fail. A good child education plan helps you figure out your expenses like business ventures or your child's marriage and makes budgeting easier.

Flexible investment:

This plan offers you the opportunity to invest in your child's future, i.e. for a long period. Factors such as a long policy term and flexible premium payment tenure make it easier for you to invest in this insurance plan.

Higher education:

As education's expense keeps increasing exponentially, it is important to choose a child education plan that keeps you financially secured when your child applies for higher education.

Protection even after death

The situation of your child's dependence on you will not change soon. Thus, the child insurance plans provide death cover that will keep your child's education continued.

Lastly, let us brief you about the eligibility criteria of the child insurance plans.

Eligibility Criteria

The eligibility criteria of the child insurance plans vary from company to company. However, they are broadly similar. The entry age starts from 18 and goes till 65, and the maturity age lies between 23 to 80 years. The minimum amount starts from ₹5,000 per month, and it is ₹50,000 per year. The tenure of the plans is between 5 to 30 years. However, it is advised to invest for a short time, since it adversely affects the returns.

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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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