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3 critical pillars for a secure future of your child

dateKnowledge Centre Team dateJune 01, 2021 views112 Views
Child Insurance Plan | Child Education Plan

Like every parent, you must have also dreamt of giving the best possible quality of life to your child. You may have memories of what you missed and want to ensure your child does not face such setbacks when growing up that could impact education and upbringing. Lifestyle costs are increasing due to spiralling inflation and quality education even at the best of government-backed institutions come at a significant cost. Child insurance plans help you in building a significant education fund for your child, however, if you are not investing in the best child insurance plan, it may not prove to be that beneficial.

You may have made great plans to send your child to the best school in town and then to the best Indian/Western University for higher studies. But have you thought about the budget needed? And if life has its plans where you are not around to see your child fulfil her dreams. It is always better to have a plan to ensure that your child grows up and does well irrespective of family circumstances.

In all major setbacks and family crises, the child is the most affected family member as his/her career gets jeopardized. Parents may bounce back from a financial crisis, but the child will never get back his lost time.

Investment plans, designed for children, can help mitigate such risks so that the child’s education continues, unhampered. Life insurance plans serve dual purposes. One, they offer financial security for family and two, they generate wealth through investment-linked policies.

Financial Safety for your Child

This should be the first step to protect your family. The biggest anxiety, as a parent, is the inability to support a child’s education in case of disability or demise. In case of serious disability, the income-earner of the family will no longer be able to work.

You can keep your child’s dreams safe with the following two plans:

  • Have a term insurance cover which is 10 – 15 times your annual income
  • Use child plans with premium protection option to save for your child’s higher education goals

A term life policy like the iSelect Start term plan from Canara HSBC Oriental Bank of Commerce Life Insurance gives your family a fixed sum as well as a regular monthly pay out upon your untimely demise. This lump sum money can help your family pay off the ongoing debt and save for future goals.

The regular income will take care of the regular expenses of your family in your absence. While a term plan is sufficient to take care of the regular expenses and smaller financial goals. Higher education might need more than a term insurance cover.

Learn more about iSelect Star Term Plan.

2. Financial Support

The world today is changing faster than ever and so does the career choices for your child. While you must start investing early to prepare for the best, you may not know for sure how this need will turn out to be for your child.

Thus, start saving early on. This will help you earn more in the long run. Insurance plans, with investment components, are ideal options because they not only provide a venue for the growth of your savings but also adequate financial safety.

How Much to Invest?

The ideal way is to start investing at least 5 to 10% of your income in your child’s higher education goal after her birth. You can revisit the goal from time to time as your child grows up and her ambitions become clearer.

So, for example, if your income is Rs. 1 lakh a month and you dedicate about Rs. 5000 a month towards your new-born child you can expect to build a corpus of about Rs. 24 lakhs when she turns 18 (at an 8% p.a. rate of interest). Investing Rs. 10,000 p.m. will allow you to build a corpus of approx. Rs. 48 lakhs.

You can increase or decrease the investment as your child’s goals become clearer.

Child Education Plans from Canara HSBC Oriental Bank of Commerce Life Insurance

Child education plans are specially crafted investment instruments to help you build the corpus to support your child’s future. These plans not only grow your savings in a tax-efficient manner but also provide necessary safety to the goal from your untimely demise.

Canara HSBC Oriental Bank of Commerce Life Insurance offers two such plans with features to match your needs effortlessly:

A. Smart Junior

  • This is a guaranteed investment plan, i.e., the future value of the investment is fixed as per your investment amount
  • The plan gives you the option to receive staggered payments near the maturity
  • You can choose a policy term that matches your financial goal such that the payments match your need for fee payments
  • The annual payments from the plan are guaranteed
  • The plan provides bonuses for long-term investment. Thus, the longer you stay invested the higher growth you can enjoy.

Learn more about Smart Junior Plan.

Child Insurance Plan | Child Education Plan

B. Invest 4G ULIP Plan

  • This is a Unit Linked Insurance Plan and gives you the choice to invest in more than one fund
  • You can invest in both debt and equity instruments based on your risk appetite.
  • If you are comfortable with equity investments, you can use automated portfolio strategies to manage your asset allocation as per market movements
  • This policy also permits partial, systematic, and milestone-based withdrawals. However, unlike Smart Junior Plan here you can schedule the withdrawals anytime within the policy term.

Premium Protection Option – The Safety Net

Both these child plans offer premium protection option which ensures that your child has sufficient money when she needs it, even if you are not there to see it through. Assuming you plan to invest Rs. 1 lakh a year into one of these plans starting the birth of your child, here’s how this feature will work:

  • In case of your demise within the policy term, say in the 7th year, the family will receive Rs. 10 lakhs (life cover in the plan)
  • The policy’s investment component will continue with the insurer investing the remaining 11 premiums over the remaining policy term.
  • Upon the planned maturity date, your child will receive the maturity value from the plan (or partial payments in the case of the Smart Junior Plan)

Tax Benefits of Child Plans

Another important factor to consider for you to invest in a child plan for your child’s future is the impact of taxes, or rather the lack of it. Tax benefits from child plans:

  • The invested money is eligible for deduction under section 80C every year
  • The maturity value from these plans is also exempt from tax provided:
    • The annual investment does not exceed 10% of the life cover amount in the plan
    • Total investment to ULIP plans including ULIP child plans is less than Rs. 2.5 lakhs in a financial year

Learn how child insurance plans can help you save tax.

3. Moral Support

‘Give a man a fish and you will feed him for once, teach him to catch fish and he may never go hungry again,’ is an adage with deep meaning. In the context of a child all, you need to help them grow into confident and strong individuals who can face the challenges of life with confidence.

This is what parental moral support does for a child. It prepares them for the future challenges of life, regardless of how harsh they are. Many studies have pointed out that small regular involvements of parents in a child’s activities go a long way in this direction.

So, while you are financially prepared to provide for their future, your presence in your child’s mind is still the most important factor in determining their future.

Insurance policies are comprehensive, robust, and wholesome as they help in wealth creation, provide adequate financial protection, and also give tax benefits. An insurance policy is synonymous with peace of mind because you know your child will get the education you planned, even if, God has some other plans for you.

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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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