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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 Term Insurance

This being a term plan doesn't offer any payout after maturity or expiration date.

Each insurance company has its own term insurance premium calculator. If you want to check out the premium quote, go for the iSelect Star term plan calculator. It gives a premium amount based on your age, gender, habits, education, and annual income.

You can purchase an iSelect Star term plan anytime between 18 to 70 years of age.

It depends on your needs. For example, if you want to cover a child's education or wedding expenses, you have to include them in your coverage. Your premium will be calculated accordingly.

If your key purpose is to give your Family financial protection, go for the term insurance plan. And if you want some savings, in the end, go for a traditional life insurance plan.

Go for at least 12 times cover than your annual income. Or you can go as far as 20 times coverage as per your needs.

The right time is when you don't have anything to keep your Family safe from financial storms, and they rely on you for financial needs.

If you are unable to make the payment or suffering from a terminal illness, a term plan pays a part of the sum insured to treat your disease.

Term insurance riders are attachment or endorsements made, while taking the term insurance policy, as a supplementary coverage to policyholders. Apart from the core death benefit, term insurance riders offer below-given additional benefits:

  • Accidental Death Rider When a person suffers from a terminal illness, his/her family ends up spending a significant amount in treatment and medical expenses. Accelerated death rider pays a part of the sum insured in advance to cover such costs and save the family from running out of cash.
  • Accidental Disability Rider If the policyholder can't pay the premium because of an accident or permanent disability, a sudden disability this pays the premium on behalf of the policyholder till completion of policy term or for a defined duration.
  • Critical Illness Rider If the insured person gets a heart attack, cancer, or any other critical illness, this rider pays a lump sum on valid diagnosis.
  • Premium Waiver Rider If the policyholder is unable to make payments due to income loss or disability, a premium waiver rider waives off all future premium payments. And the term policy remains active until the expiration date.
  • Income Rider: The rider ensures that your family receives regular income + sum insured in case of unfortunate demise of life insured.

Anyone can go for life insurance as it offers some savings after the maturity date, but it doesn't cover the protection of your family . The best term insurance plan is solely designed for taking care of loved ones if something happens to you. Term plans act as a shield between your family and sudden financial fall. They make sure that your family lives a healthy life even after you. With a little amount paid per year, you can be worry-free from the family's financial conditions.

Questions that you need to ask while buying Term Insurance?

  1. 1. Amount of premium you have to pay based on your age, habits, education, and monthly income
  2. 2. The total number of benefits covered in the term plan. Do they include benefits that you care about the most?
  3. 3. How to save money on tax if you pay for the term plan?
  4. 4. Do they offer regular income options?
  5. 5. Can you change the coverage and premium in the future?
  6. 6. Does the claim consider valid if death occurs outside India?
  7. 7. Which kind of death is not covered by insurance?
  8. 8. Can NRIs take term insurance? If yes, what are the conditions?
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