What Are The Determining Factors In Buying A Child Plan In India?
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A child plan is a flexible investment and insurance tool that enables you to satisfy your child's financial requirements. In essence, a kid insurance plan offers advantages for both investments and insurance. The insurance coverage advantage shields your child from any unfavourable life circumstances, such the premature death of a parent.
In addition, the kid plan's investment component improves your child's financial requirements by generating disciplined, long-term investment returns. To know more about buying child plans, read on.
What Are The Factors One Should Determine Before Investing In A Child Plan?
Following are the factors that an individual should determine before investing in a child plan -
- Claim Settlement Ratio - A measure of an insurance company's effectiveness in resolving insurance claims is the claim settlement ratio, or CSR. The amount of claims paid out by the insurer increases as the claim settlement ratio (CSR) rises. You should select an insurance provider with a high CSR.
- Coverage - Your age, yearly salary, and lifestyle choices all have a role in how much coverage you receive. Therefore, you must examine several child insurance policies based on the available coverage amount and choose a child plan that gives the most coverage for the lowest possible premium cost in order to guarantee your child's financial future.
- Term Of Policy - It is wise to select the longest insurance coverage tenure feasible to make the most of a child plan's advantages. You may make sure that your child will have enough financial security during his or her formative years thanks to the child plan. Before selecting the child insurance plan with the longest policy term, make sure to evaluate the various options.
- Add-Ons - Many insurance providers provide you the option to install rider add-ons in order to increase the coverage advantages under a kid plan. These add-ons offer additional financial protection above and above the standard policy benefits for a variety of life occurrences, including critical illness, accidental death, and accidental disability.
- Maturity Benefits - When a child insurance plan matures, it promises to pay out a sizable quantity of money that has been collected over the course of the policy. It is recommended that you pick a child plan that provides the most maturity advantages for the particular price paid.
- Premium Waiver Benefit - Although the majority of child plans provide the premium waiver benefit as a choice or important component of the standard plan. The premium waiver is crucial because it protects the insurance against financial and income loss in the event of a parent's death. The policy remains in effect for the duration of the policy term and any upcoming premiums are completely waived. This guarantees that the maturity benefit, in addition to the death benefit paid, is preserved during the policy duration.
- Flexibility - The premium amount is dependent on the amount of maturity benefit you choose as well as the promised money. You have the option of paying the premium over a certain length of time or at regular intervals. The majority of life insurance companies provide choices. Based on the insurance you purchase, you may decide whether you want to obtain the maturity amount payment in a lump sum or spread over a period of 5 years or more.
Are Child Plans Exempted From Taxations?
Insurance purchasers frequently search for ways to reduce their tax obligations in addition to the death benefit and the yearly income benefit. It is important to highlight that child insurance policies, like all other insurance plans, have tax advantages. Under Sections 80C, 10(10D), and 80DD of the Income Tax Act of 1961, policyholders may deduct such insurance from their taxable income. Keep in mind that a child plan's full distribution, including death and maturity benefits, are tax free.
Endnotes
Before starting to invest in a child plan to just provide them a bright future, you should think about your family's financial status, the life insurance you want to give your child, their financial needs while you are away, the insurer's claim payment percentage, and other benefits that the plan offers.
Also read: Know About The Tax Benefits Of Children's Education
