What Are Child Insurance Plans? How Do They Work?

Your children are the most essential part of your life as a parent. When attempting to achieve a balance between emotions and realistic life, balancing spending and investing the money correctly sometimes becomes a tricky challenge. Here’s a perfect investment solution for your child’s future - Child Insurance Plan. It not only helps you create a substantial investment corpus for your little one but also helps you leave a secured financial future for them in your absence.

What is a Child Insurance Plan?

A child insurance coverage is a mix of insurance and savings that guarantees a safe future for your child. Life insurance benefit under the plan is available as a lump-sum payout at the end of the policy term and the investment benefit can be availed either as a lump-sum amount or by way of regular instalments. You can make use of this investment to finance the education of marriage expenses of your child or to support their entrepreneurial dreams.

Also Read:- List of Top 5 Child Plans In India 2021

Why Should You Buy a Child Plan?

Easy monthly savings will not be enough to cover the rising cost of higher education. In order for your child to shine in a dynamic world, school fees should be the last restriction. Child insurance policies allow you freedom to spend on the basis of your child's schooling needs, existing financial situation, and other monetary priorities. Usually, child insurance plans offer a lifetime allowance of about 10 times the monthly premium. In addition, these proposals also include, where applicable, a partial withdrawal facility to help you meet unplanned financial requirements. In addition, you can even make use of tax incentives for the premium you have received.

How A Child Insurance Plan Helps You Protect Your Child's Future?

A child insurance plan helps you secure your child’s future by offering the below-mentioned benefits -

1. Provides financial stability for the most important years of your child's life.
2. Provides a variety of fund options to help you reap substantial returns.
3. Safeguards the future of your child in case of your untimely demise by providing a death benefit.
4. Favors disciplined long-term savings which helps you create a high investment corpus easily.

Types of Child Insurance Plans

Child insurance policies come in two types -

1. Child ULIPs

A Child ULIP essentially works the same way a normal ULIP plan works. A portion of the premium paid is invested in funds, and the remainder is invested in shares. The policyholder is free to choose how they want to invest their money in varying securities - equity, debt or a combination of both as per their investment style and risk appetite.

2. Child Endowment Plans

Child endowment plans are savings cum life insurance plans. These help you grow your savings in a systematic manner by way of regular additions and also a terminal benefit. These plans provide guaranteed returns as your money is not invested in market-linked funds unlike ULIPs and is suitable for risk averse individuals.

You May Also Like To Read:- 5 Reasons To Purchase A Child Plan

Things You Must Know About Child Insurance Plans

Conclusion

A child insurance coverage is also an integral part of protecting the future of your child. By incorporating the advantages of a life insurance contract with a corpus-creating investing advantage in different financial instruments, a child portfolio may be a diverse financial option. Find the right plans, bear these points in mind and guarantee a good future for your kids.