Tips to Choose the Best Child Insurance Plan for Planning Your Child’s Education

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The main aim of a life insurance policy is to protect one’s family from the financial insecurity associated with unexpected death. There are different forms of life insurance covers available in the market. While term plans are the most commonly used life covers, there are other plans that allow policyholders to build a corpus for future requirements. Child insurance plans are offered by almost all the top insurers in the market to protect the future of one’s children. These plans allow policyholders to build a corpus for the higher education and marriage of children.

A good education is of utmost importance in this competitive world. The cost of education is getting expensive day by day. If you wish to provide the best education for your child, you need to invest in a plan that offers maturity benefits high enough to take care of the huge cost of higher education. Child insurance plans are mostly endowment plans or unit-linked plans offered by various insurers in the market. You may choose the policies based on your specific requirements.

Features of child insurance plans

Some of the features of child insurance plans are listed as follows:

• Customers can choose between market-linked child insurance plans or non-linked plans based on their risk appetite.
• In the case of market-linked insurance plans, customers can choose from debt plans, equity plans, or hybrid plans based on their risk profile.
• Parents can choose a policy term anywhere between 5 years and 25 years depending upon their requirements.
• Most plans offer flexible premium payment terms for policyholders. Customers can choose from yearly, half-yearly, quarterly, or monthly premium payment options.
• Unlike term plans, child insurance plans offer guaranteed maturity benefits at the end of a specific policy term.
• In case of the death of the insured, future premiums are waived in most child insurance plans available in the market.
• Typically, child insurance plans provide lump sum payment upon the death of the insured person before the maturity date.
• Maturity benefits are paid at the end of the policy term. The built-up corpus along with additional bonuses and final bonuses will be paid to the policyholder upon successful completion of the policy term.

Factors to consider while choosing a child insurance plan

Before you sign up for a child insurance plan, make sure that you consider the following factors:

• Identify your goals: Before you choose the plan to invest, you need to identify your goals on how much money you wish to have upon maturity. While it is too early to know what your child will be studying, it is better to build a corpus slightly higher than what you wish to have. By knowing how much money you wish to have, you can calculate the amount you need to invest every year in the policy.
• Develop a plan: When you are opting for child plans, you need to have a proper plan on how to proceed with the investing. Make sure you choose the sum assured amount based on your child’s requirements. Most of the life insurance companies in the market have EMI calculators in their official website for customers to check the amount they will be spending. With these tools, people can develop a strategy on how to invest in child plans and build a corpus for their children.
• Take inflation into consideration: One mistake that people often make is that they fail to consider inflation while determining the sum assured amount. The cost of products will not remain the same over the course of 15 or 20 years. The same goes for education as well. For this reason, it is not a good idea to choose the sum assured amount based on today’s expenses. When the sum assured amount is adjusted for inflation, you will have enough money to secure the education requirements of your children.
• Choose the type of policy: Child plans are available as market-linked plans as well as non-linked plans. If you have a high appetite for risk, you may opt for market-linked plans where there is a great potential for high returns. Non-linked plans are a form of endowment plans that offer savings benefit along with accrued interests and bonuses. With non-linked plans, you may also accurately calculate the exact maturity amount you might be getting.
• Choose the right plan and company: You may choose the right company based on various factors such as claim settlement ratio, service quality, choice of plans, etc. Once you have decided everything, you need to pick the right plan from the list of plans offered by the company. Read the policy document carefully and understand the benefits offered before choosing the plan that is suitable for you.

Conclusion

Choosing the right plan for your children’s education is one of the major decisions you may have to make in your life. The tips mentioned above will help you pick the right one from the long list of plans available in the market. With the right plan, you may build a corpus sufficient to take care of your child’s future education expenses. While the costs of child plans are significantly higher than term plans, the maturity benefits offered here make them a worthwhile investment.