help create a corpus for crucial stages in the child’s life
A parent's untimely death can create undue stress and tension in the family. Children may be pressurised to work at an early age to supplement the family's income. They may have to compromise on higher education and all other luxuries and face the financial impact of the parent's demise. Even if parents have saved some money for the children, it may not mean much in terms of the child’s future, considering inflationary effects.
In such cases, when the parents are no longer present to take care of their children’s needs financially, a child plan acts as a financial buffer for the child especially in their early stages of growing up. Term plans do offer low Premium rates and a high insurance cover amount. However, the Policy ceases to exist after the payout of Assured amount in case of an untimely death. In case of a child insurance policy, the policy not only settles the lump sum payment after the policy holder’s untimely death but also continues to exist after that.
Premium amounts that normally need to be paid by the parent are waived by the insurance company in case of death of the parent (policy holder). Not only this, the insurance company pays the entire remaining premium on behalf of the parent. In a child insurance plan the payout can be customized to the children’s growing needs and expenses, and could counter the rate of inflation. Though the initial investment and the premium cost is higher in a child insurance policy the benefits are multi-fold. Some plans are linked to the equity market and some are traditional. And the good thing is the Tax Benefit for the premium paid under section 80(C) and tax exemption under section 10 (10D), when it comes to investments in market linked plans.
Child insurance, like any other investment plan, needs to be done as early as possible after beginning a family to gain maximum return on investment. It can be modified according to the needs and income level of the family. Riders can be added to the plan based on the family’s needs which may add to the investment. With so many advantages, child insurance can truly help in minimising Risk and maximising returns, apart from securing the child’s future in their growing years.