Children’s education determines the quality of life they will lead in the future. That is why most parents emphasise on education. However, quality education has its price, like everything else in the world. This price is also affected by inflation and even the most subsidised institutions may have a hefty fee by the time your child grows up.
Thus, you must invest and build a corpus for their higher education since the beginning. Child education plans are the kind of investment options especially crafted for your child’s future financial needs. These plans will allow you to invest, grow and provide for your child’s goal without much effort.
1. Child's Future is Secured
While you are there for your family and child, you will ensure that their financial goals are met. But, if any mishap befalls you, your family may struggle to fulfil their financial goals, including your child’s higher education. You can buy a term insurance plan to provide financial security to your family.
However, long-term financial goals such as child’s higher education will need something better. A child plan can not only help you reach the goal by investing, but it can also help you safeguard the goal you decided.
For example, if you started with an aim to build a corpus of 40 lakhs for your child’s higher education dream, the child plan will ensure your child can reach there. Here’s how:
- Assuming your annual investment for the plan is Rs. 2.5 lakhs
- You will be investing for next 15 years
- You have a life cover of Rs. 25 lakhs under this ULIP plan
- In case of your death in the seventh year (before completing your investment tenure):
- Your family will receive Rs. 25 lakhs life cover amount immediately
- Insurer will continue investing the due premiums as if you were alive till maturity
- At maturity your child will receive the accumulated fund value from the plan (close to Rs. 40 lakhs) as you had planned
Thus, the goal protection option in child education plans can help your child meet her education goal even after your untimely death.
Learn why have education plans become a necessity.
2. Enjoy Tax Benefits
Child education insurance plan offers a three-in-one tax benefit for you. Investment in the plan, capital growth and withdrawals from the plan are all exempt from tax.
- The premiums you pay on the child education plan qualifies for tax deduction up to Rs.1.5 lakh under Section 80C in a financial year
- The growth of funds and any switches between debt and equity funds within the plan are exempt from tax
- Partial withdrawals from the plan after the five-year lock-in period are tax-free
- Maturity value (and death benefit) received from the plan is also tax-free
If you started a new child plan on or after 1st Feb 2021, you can invest up to Rs. 2.5 lakhs a year (financial year) in this plan without losing the tax benefits on withdrawal and maturity.
3. Multiple Asset Options
You can invest in two different types of child education plans as per your risk appetite and financial need:
- Unit Linked Child Plan or Child ULIP plan
- Endowment Plan for Child’s Education
Both plans offer you safe investment option, but endowment child plan will offer a guaranteed sum at maturity. On the other hand, Child ULIP will also offer equity funds for high-risk high-return growth over longer term.
Thus, you can invest in ULIP plan if you want aggressive growth and have the appetite for equity investment. Even if you want to avoid equity, but still want market linked returns ULIP plan has debt fund option for you.
Learn more about ULIP as an investment for your child.
4. Automated Portfolio Management
If you are using a ULIP plan to grow your money aggressively, you need a way to manage your portfolio risk while you are not looking. The best child plans including Invest 4G ULIP plan from Canara HSBC Oriental Bank of Commerce Life Insurance offer automated portfolio strategies.
These strategies help you manage your portfolio risk based on market performance rather than your intervention. So, while you have automated your investment, the strategy selection will free you from hovering over your child plan in a volatile market.
5. Bonus Additions
Every good child plan, whether ULIP or endowment, will offer bonus additions for long-term investors. The best child plans, however, can offer more than one bonus additions. For example, Invest 4G ULIP plan offers loyalty bonus for long-term investor and wealth boosters for growth seekers.
You can look for similar benefits in child plans to select the plan best suitable for meeting your child’s education goal. Additionally, not every higher education institution seeks a lump sum payment. So, why not look for a plan which will allow staggered pay-outs or systematic withdrawals at the end of the policy tenure.
Plans like Invest 4G, Guaranteed Savings Plan and Smart Junior Plan from Canara HSBC Oriental Bank of Commerce Life Insurance offer these features and benefits.