How Does a Child Insurance Plan Work?
Published On Jul 21, 2021
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Child insurance plan is a type of life insurance plan that provides financial protection in order to meet the needs of your child. Investment in child insurance plans can be done to meet bigger life goals of your child such as marriage, higher education, etc.
At the time of building a financial corpus to meet these long term goals for your child, consider investing in an insurance plan as it offers a safety cushion to the corpus in the event of your unfortunate death. During any such unforeseen event, the plan would invest the money in place of you and would provide a maturity amount that you were aiming for your child. Generally, a child insurance plan can be customized with various rider options to enhance the plan according to the individual needs of your child.
How does a Child Insurance Policy Function?
The below mentioned objectives of your investment get fulfilled by purchasing a child insurance plan:
- Offers financial assistance to fulfill higher education goal of your child
- Provides financial assistance in the event of your untimely demise for meeting education, marriage and other related goals of your child.
- Offers various types of funds options in order to assist you in reaping substantial returns.
Advantages of Having a Child Insurance Plan
Highlighted below are the benefits of investing in a child insurance plan:
- Financial Protection: With your earned income, you can provide a comfortable and safe life for your child. However, in the event of your unforeseen demise that would halt the financial support, a child insurance plan would behave as a financial safety net. It provides life cover offering a lump sum payout in the venet of eventualities.
- Maturity Benefits: A child plan provides the policyholder with a lump sum benefit at the time of maturity of the plan i.e at the end of plan duration. You can choose a maturity date according to the time frame corresponding to the future needs and requirement of funds by your child. Throughout the policy duration, the amount invested by you builds into a tidy corpus, sufficient to finance the aspirations of your child.
- Partial Withdrawals: Through a ULIP child plan, you are permitted to withdraw a small part of your invested funds in order to fulfill the urgent needs of your child. Once the lock-in phase is over, you can take out some of your units and use them for urgent expenses such as payment of school fees, immediate medical expenses etc.
- Tax Benefits: Child plans are a part of life insurance plans. Hence, the premiums payable are eligible for tax deductions under the section 80 C of the Income Tax Act. A policyholder can claim deductions up to Rs 1.5 Lakh towards the premiums paid for your child insurance plan.
At the End
A child insurance plan is an important investment in order to safeguard your child’s future. Investing in this plan helps you in growing your money with the power of compounding. However, if you wish to accumulate the complete advantage offered under a child insurance plan, you should begin with investing early in life. At the time of finding a right child insurance plan, keep the above mentioned points in mind and safeguard your child’s future.
Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.