Withdrawal Criteria In Child Plans
Updated On Sep 07, 2022
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A child plan is an investment strategy provided by businesses to ensure the security and safety of the child's aspirations and objectives. Higher education is usually portrayed as a multi-stop journey rather than a singular destination. The best child plan should address each of these stages while minimising your stress. Child Plan gives you a variety of options to help you meet your child's future financial needs.
Need For Withdrawal Criteria
The ideal child plan would let you access the accumulated funds without incurring any tax penalties or risking the investment. These kinds of child plans allow for many partial withdrawals as you continue to make investments. The Child plan also enables you to simultaneously invest in your child's future educational aspirations and plans for marriage.
Everyone encounters an emergency or a crisis at some point in their lives, according to the partial withdrawal clause. You are protected from unforeseen events when there is an urgent need for money by a partial withdrawal provision. If you choose the partial withdrawal option, you can take money out of the amount invested in the kid plan to cover unforeseen needs.
Option Available For Withdrawal
Only once the lock-in time has passed are partial withdrawals under Child Plans allowed. There are numerous withdrawal options available to you when you invest in child plans.
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Withdrawals Before the 5-Year Lock-In
The 5-year lock-in term is a standard component of every child plan. The money collected can only be returned after the Child Plan investment has been in place for five years, even if the money is withdrawn in full or in part by surrendering the policy or refusing to pay the premiums. Any additional fees will be charged when the policy is cancelled, and the maturity amount will also be paid in a single payment. If you withdraw before the lock-in time, your Child Plan life insurance will be worthless, so you must get it online.
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Withdrawal Following a five-year lock-in period
It is typically advisable that you take partial withdrawals rather than a full withdrawal after the lock-in period on your child plan has passed. Making partial withdrawals from your policy can help you get out of debt rather than cancelling your entire policy, capping your fixed deposits, or taking out loans. Withdrawals are subject to specific limitations, which change depending on the terms and conditions of the company's policy.
Restrictions On Withdrawals
Withdrawals are subject to restrictions. Some are listed as being under
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Cap on Withdrawals
The maximum withdrawal varies between insurance companies. While some businesses only permit 10% of the premium, others could only permit 20% or so. The cap might also be determined by the value of the fund after a withdrawal. There are situations when taking large withdrawals from a ULIP may result in the cancellation of your insurance.
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Withdrawals When Top-Ups Occur
If you want to remove money from your child's plan after a top-up investment is made, the insurer will pay you back using the top-up amount. It should be remembered that only after five years have passed can withdrawals from top-up accounts be claimed.
Important Considerations When Terminating a Child Plan
- Recognise the terms and conditions of the withdrawal.
- To avoid having your coverage cancelled, pay your premiums on time or ahead of schedule.
- Partial withdrawals are only permitted after five years of consistent premium payments.
- Money partially removed results in a decrease in the sum Assured to you
Conclusion
To make partial withdrawals from a Child plan, all that is required is that the premiums be paid on time. If the policyholder fails to pay the premiums on time, the policy will be terminated and the withdrawal benefits would be forfeited. So, if you're considering cancelling your kid plan, make sure you've made all of your previous payments to avoid getting cancelled.
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