As parents, we always aim to provide our children with the best choices in everything they would like to do in life, especially in education. Therefore, one of the main tools parents use to maintain a strong financial corpus to fund their children’s future needs of education, marriage, etc., would be these child education plans offered by many financial institutions today.
How do child education plans work?
Investment cum insurance policies: These plans provide your child with financial security in case of the untimely demise of a parent. In the child education plan, premiums must be paid to the insurer for a particular period.
A lump sum amount is paid out as a benefit on the timely fulfillment of the premium and at the maturity of the policy term. The premiums paid in these plans are bifurcated into providing life cover for the parents, and the balance is invested in debt instruments to offer savings for the child.
Types of child education plans
Child endowment plans
These low-risk child education plans provide a life cover and guaranteed maturity benefits.
Child ULIP (Unit Linked Life Insurance Plan)
In these plans, a part of your premium is used for savings for your child, and the remainder of the premium is invested in debt and equity instruments. While providing a slightly higher return, they are somewhat higher in risk than the traditional child endowment plan.
Single premium child plan
The policyholders pay a one-time, single premium amount in a lump sum for these plans to stay hassle-free for the rest of the plan period.
Regular premium children’s plan
Unlike the single premium plan, these plans offer the policyholder the flexibility to pay premiums at regular intervals as fixed with the insurance company.
Benefits of child education plan
Wanting to provide your child with the best education is what most of us as parents wish to do in today’s world. However, with inflation on the rise, providing good quality education at the choice of institute is more of a pocket pinch than ever. Therefore, a good education plan is a must today to secure your child’s future.
Some of the benefits of these plans are as follows:
- Tax exemption benefits: the premiums for these policies are eligible for a tax deduction. Investments in the plans are tax-exempt.
- Security for the child’s future: these plans help In systematically saving and providing a lump sum fund for the child’s educational needs in the future,
- Life insurance policies play a dual role in saving and providing life cover to the policyholder.
- Some of these plans, like the ULIP plan, add bonuses for the investor.
To sum it up, a child’s success in life depends on a good education path, which requires careful planning and a sound financial corpus. Undoubtedly, one of the best instruments to achieve that financial goal systematically over the years, child education plans are one of the most sound and safest ways to go about it.
Also Read: How Education Loan Helps In Building Career?
© Ruchie Verma.
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