Child Plans: Myths Vs Reality
Your future depends on how talented and accomplished your child turns out to be!
Or should we just reverse the belief and say that you make the future of your child.
“So you sow shall you reap.”- anonymous.
It is an age-old thought that teaches that if we make our present good, our future will definitely be good. For many, especially the working class, life goes in a circular motion from one generation to the other. Today if you are able to provide the best to your child, it is not giving them luxury but is about giving them strength to face the world. Not all have the financial capacity to manage and provide the best. But it does not mean that there is no world of hope for them. Such individuals can buy child protection plan insurance.
Why insurance when you can save otherwise?
For that we will have to understand what is child protection plan life insurance?
What is a Child Protection Plan?
A child insurance policy is a life insurance policy that enables you to save for the important milestones in a child’s life. These milestones could be of a higher education or a dream destination wedding. Along with the benefit of lump sum payment at the time of milestone, the plan protects the interest of the child even after the unfortunate event takes place.
The policy protects the child and provides the feature to waive off the future premium after the death of the parent.
Still, thinking of why insurance?
Let us read further.
The biggest financial concern in today’s time is the rising cost of living, education, etc,. In short inflation can break your back and deplete your savings faster than you can imagine. Assuming 5% inflation over the next 10 years, if you want your child to pursue MBBS know that the current cost of education will be Rs.55 lakhs. The cost of the same degree after 10 years from now will be Rs.2.35 crores, that too, from domestic colleges (Source).
Despite the benefit of payment that individuals can get from a child plan, individuals resist in buying the plan. It is because of common prevalent myths.
Let us read further common myths and the reality about the child plans.
Child Plan: Myths Vs Reality.
These are the myths one must read for you to know:
Myths 1: Child plan is a protection plan for a child’s life.
Reality: Under a child plan, the insured covered is not the child. A child cannot pay the premium or foresee how to protect his/her future. The reality is that the parents are the insured under the policy who is earning. The benefit of the plan is that the child’s future is protected even if the parents are not alive.
Myth 2: The death benefit under the child plan is paid after the death of the insured parent.
Reality: It is a common myth amongst the individuals that the child plan pays a lump sum amount right after the death of the child. The plan then does not cover the child’s life milestones. But the reality is that the child protection plan will pay when the child arrives at an important milestone. Also, after the death of the parent, all the future premium is waived off.
Myth 3: Inflation will reduce the benefits of the child plan as the insurance policy does not take the factor into account.
Reality: The market-linked child plan invests money to generate returns of your choice. A few plans offer guaranteed returns where a percentage of the fund value is added in the fund value every year. It gives higher returns to the policyholder who can then meet the requirements of their child.
Myth 4: Child plans are not very transparent.
Reality: It is a complete myth. Under the market-linked child plan, the charges are clearly spelt out. The insurance company clearly gives the break-up of the various charges and the amount invested. A child plan also gives regular statements which the policyholder can monitor.
Myth 5: Child plans do not offer liquidity and all the money paid is blocked.
Reality: The myth speaks that the child plan does not offer any liquidity. But the fact is that under the child plan, the pay-outs come at the regular intervals. The payments coincide with major milestones in the child’s life. A market-linked child plan also gives you the flexibility to make partial withdrawals after the completion of the lock-in period.
If you realise that the myths have affected your mind frame, read about the benefits of the child plan.
Benefits of the Child Protection Plan.
These are the benefits of the child protection plan:
- Secure your child’s future: The child protection plan secures the child’s future. You may aspire to send your child for higher education to prestigious colleges in India or abroad. But you may not have the funds to afford the fee expenditure. With the child insurance policy, you will not have to worry about the fees that are more likely to rise by the time you will require it. With the child insurance plan, your child can feel financially secured and can pursue the dream.
The child insurance policy takes into account the factor of inflation which pushes the growth of the money you have. Suppose, you want your child to be a designer after 8 years. The current age of your child is 10 years and the child will begin his graduation when he turns 18. At present the cost of education for designing is Rs.15 lakhs in Singapore and you barely could save anything extra for the child. You have the total savings of Rs.10 lakhs only. To accomplish the child’s future dream, you would need to buy an additional child plan of Rs.21.09 lakhs. The rate of inflation assumed here is 4.27%. It is because your current savings will only cover 76% of the total estimated costs. Use the calculator here to find out how much more cover you should buy for your child.
- Protection in case of unforeseen circumstances: In the event of the death of the life insured (parent), the future premiums will be waived off. The child will get the financial protection at the defined time when the child has to complete the milestone.
- Option to choose the riders: The additional covers also called as riders can be purchased at the inception of the policy. The basic scope of coverage can be enhanced to make the child plan wider and better. The rider covers come at a nominal premium. Don’t think much! Wider the cover, the better the policy becomes.
- Helps you plan the grand wedding of your child: You can buy a child plan to save for your child’s wedding in the future. You may want to plan a grand destination wedding. If the current cost of the expenditures is out of your budget, it is clear that in future the expenses will be out of your pocket. Suppose you want to save for your child’s marriage. The current age of your daughter is 10 years and you plan to get her married when she turns 26 years. Now, imagine you would have spent today on your daughter’s marriage for Rs.60 lakhs. When your child turns 26 years old, the cost will go up by Rs.59 lakhs approximately. Keeping this in mind, you would need an additional cover of Rs.1.1 crores. Don’t fret if you cannot think of having this amount. Simply buy a child plan now for a better future tomorrow.
- Tax Benefit: The premium paid under the child plan allows you to get tax deduction under Section 80C of Income Tax Act. The total limit of tax deduction allowed is Rs.1.5 lakhs. Apart from this, the maturity amount received at the end of the policy is also tax exempt under Section 10(10D).
Best Child Insurance Plan.
The best child insurance plan that you consider buying is:
Child’s Future Assured Plan
- The child’s future assured plan can be purchased for either education or marriage or both.
- The plan offers complete financial security to the child in the absence of the child.
- The Child’s Future Assured Plan offers complete flexibility to choose from various pay terms and policy terms.
- The insurance policy allows you to have worry-free achievement through policy continuance benefit.
- You can buy the child plan here.
Buy a child protection plan to secure your child’s future for higher education or marriage. It is the best way to financially secure your child’s life when you are not around to take care of your child. You can visit the link to know more about the child plan.