Child Insurance Plans: Can They Meet the Education Needs of Your Children?

Invest in child insurance plans to secure long term education and financial needs

Parents want to provide their children with the best education. Suppose the cost of education is not a hindrance to providing your child with a decent education. In that case, you should start saving money with suitable investment options. There are myriad investment options available. However, most are self-funded, such as mutual funds, stock investing, public provident funds, real estate, gold, and many more. The primary issue in the case of self-funded investments is that accumulation of wealth stops if the person dies, either a natural or accidental death. To avoid such uncertainties, a child insurance plan is a better alternative. 

In addition to meeting immediate costs, planning for the long-term cost of education and kids' financial needs is prudent. Hence, you may choose investment options that cover all these factors. For example, a child insurance plan can weather the uncertainties involved in funding your kid's education needs. 

What is a Child Insurance Plan?

A child insurance plan is an insurance-cum-investment plan. The insurance aspect of the plan takes care of kids' financial needs even after the insured parent's death. The plan's investment aspect helps you grow the fund so that you can secure your kid's financial and educational needs. You can use child insurance plans to create a corpus that will help you finance your child's career goals, as well as, higher education needs. These plans are way better than saving money because the investment component helps your money grow faster than the rising inflation. 

Why Should You Buy a Child Insurance Plan?

A child education plan helps the insurer to:

1. Build a Corpus to Meet Education Needs of your Child 

A child insurance plan enables you to make regular investments to secure your child's future. Higher education in India is costly. If you want to provide your child with a good education, a child insurance plan can help you meet that need. Additionally, suppose something untoward happens to you. In that case, this child plan will ensure the best possible future for your kid even when you are not there. With the help of this child fund, you can finance your child's medical or engineering college costs. You can also use the corpus to finance your kid's higher education abroad. 

2. Combat Inflation

Inflation in India is hovering around 6%, which is significantly higher than the 4-4.5% cap prescribed by the RBI. If you save your money, your wealth will not increase. Instead, the rising inflation will decrease your wealth's practical value in the future. By opting for a market-linked child insurance plan, you can expect a return way above the current inflation rate. Such a plan usually fetches an annual return of 10-12%. 

3. Take Care of Emergencies

One of the major advantages of these child plans is that you can withdraw partially. In case of any medical emergency for your child, you can make a partial withdrawal against the policy and make payment for your child's treatment.

4. Take Care of your Child's Financial Needs even after your Death

If the insured parent dies, a child plan ensures that the desired sum of money is provided only at the desired age and not before or after. The best part of this insurance plan is that the insurance company funds the policy after the insured parent's death. That's what makes a child insurance plan unique. This means the saving plan for your child's financial and educational needs doesn't stop in case of your death. You can avail of this benefit if you opt for a "waiver of premium" (WOP) benefit while buying such a child plan. In case of the insurer's death, the WOP feature ensures that your child receives twice the amount of money than the sum assured amount. You can choose either a ULIP or an endowment plan.

5. Get Regular Payouts

A child-insurance-plan ensures that your child receives regular payouts at specific ages. In addition, you can receive a fixed amount of money at different time intervals. These regular payouts can be used to take care of the needs regarding education, marriage, etc.  

Child insurance plans with Waiver Of Premium WOP are costlier than normal plans because they keep funding your investment corpus even after your death. The WOP feature also ensures that your child receives money at the desired age. If you want to secure your child's future and help them achieve their financial and education needs, it is prudent to buy a child insurance plan with Waiver Of Premium (WOP). 

Disclaimer: This article is intended for general information purposes only and should not be construed as investment or legal advice. You should separately obtain independent advice when making decisions in these areas.