Common Questions To Ask Before Buying Child Plans

Most parents have no idea where to start, how much to save, or which plan to choose when it comes to purchasing an insurance/investment plan for a child. It is best to start saving for your child's financial needs as soon as possible because doing so will enable you to amass a sizable sum that will cover all of his future milestones. 

Common Questions To Ask Before Buying Child Plans

Below are some questions that you must seek to answer before entering into a child plan.

• What is the Financial Objective of the Child Plan?

This is where you should start and the fundamental question to ask when selecting a child plan. You should think carefully about the type of education you are saving for. Will you be setting money aside simply for your child's undergraduate studies or also for a master's? The price of a degree earned overseas may be much more than that of a course taken at home.

Every country has a varied cost of education. Every youngster should take part in extracurricular activities given the competitive environment of today and for multidimensional growth. You must make plans for the possibility that your child will later decide to seek extra vocational training in a field of their choosing.

•  When Should Planning Begin?

The simplest response is that the earlier the better. Starting early gives you a lot of time to invest, allowing you to steadily accumulate wealth. Selecting a strategy that promotes long-term investing is ideal.

• How Should Costs Be Estimated?

You must assess the expense of education in accordance with annual inflation rates when selecting the amount assured. A prestigious Indian college currently charges up to 15 lakhs for an MBA. The cost of higher education in India is predicted to almost treble in 10 years across all fields. 7% inflation is taken into account (the average in the past 10 years).

• How Long Will Your Plan Be In Effect?

Your plan's maturity time should take into account your child's current age. In 12–13 years, if your child is currently 5 years old, they will be attending college.

You must choose a kid education plan with maturity duration of at least 10 years as a result. Due to increased premium rates for an amount that will be withdrawn before the proper time, a short-term plan is not a smart choice in this situation.

•  Can You Make Partial Withdrawals Under Your Plan?

A partial withdrawal clause can be useful if you need money before your plan reaches its maturity period. The ability to periodically withdraw funds can be quite helpful in covering the rising cost of schooling.

• Does Your Plan Have A Waiver For Premiums?

Nowadays, the majority of plans feature a premium waiver that enables the policy nominee to take use of the plan after the maturity period in the event that the policy holder passes away. The nominee is entitled to the insured sum at maturity and all past-due premium payments are waived. This waiver is also available as a "rider" or add-on to the plan if it is not part of the standard plan. 

• Should You Choose An Endowment Plan Or An Equity-Linked Child Plan?

Either option is acceptable, depending on your risk tolerance. If you have a larger risk tolerance, you can choose stocks or unit-linked child plans for a period of 10 years or longer.

• Do Bonuses Are a Part of Your Plan?

According to your plan, you can be entitled for bonuses. After the first year, bonuses begin to be credited and aid in the growth of the fund. Simple or compound revision bonuses are both possible. A financial bonus could be a part of certain schemes.

•  How Much Money Will You Save In Taxes?

The sum assured and any bonus (i.e., the proceeds of the policy) received upon maturity or as a result of the insured's death are exempt from taxation under Section 10D of the Income Tax Act of 1961. Section 80C of the tax code permits a tax deduction for the plan premium.

Conclusion

These are a few things you should be aware of before deciding whether to purchase a child insurance coverage. Your selection totally hinges on how much risk you are willing to take, whether you choose an endowment plan or a ULIP. It is often advised to start saving early to secure a bright future for your children.

Also Read: 

Are There Risks Involved In Buying Child Plans?

How Can Claims For Term Insurance Get Rejected?