The type of life that children will have in the future is determined by their education. Hence, a majority of parents place a high value on education but like everything else in life, it does not come cheap. This is because, the price is affected by inflation, even the most heavily supported institutions may charge a significant fee by the time your child enters maturity. Therefore, you must immediately begin investing and building a fund for their higher education. A child plan for education is an investment option that is tailored to your child's individual financial needs in the future. These plans will make investing, growing, and providing for your child's objectives a breeze.
What is a Child Education Plan?
A child plan for education is intended to assist youngsters in pursuing their educational goals in whichever profession they desire. These plans include a life insurance component as well as options to save money on premium payments. The one-time payment at the end of the policy period ensures that neither you nor your child will face financial difficulties when it comes to paying for higher education. When it comes to saving for your child's secure future, you have a variety of options to consider.
Are Child Education Plans Tax-Exempt?
Those who buy insurance frequently look for ways to save money on taxes in addition to the death benefit and the yearly income benefit. It's worth noting that, like any other insurance plan, a child plan for education has tax advantages. Sections 80C, 10(10D), and 80DD of the Income Tax Act of 1961 allow policyholders to deduct such policies from their taxable income. They shall be deducted, in accordance with and subject to the provisions of these sections, from the total income of an assessed for an individual. It's worth noting that all proceeds from a child plan, including death and maturity benefits, are tax-free.
Why Invest in a Child Education Plan?
Investing in Your Child's Education
If you begin investing for your child's education now, the prices will be far higher when the time comes for your child to enrol. If you have a child plan for education, you won't have to worry about your child's studies. Based on the child’s interests and abilities, he/she can select from a choice of courses. They would be able to follow their aims and professional goals with the money provided by the child education insurance.
Maturity Benefit to Assist in College Funding
As you can see, the cost of education is rising at an alarming rate, which is significantly faster than the overall rate of inflation. As a result, investing in a child-saving plan that provides enough funds to help your child meet all of his educational milestones is a requirement.
Obtain Income Tax Benefits
Under Section 80 C, a tax deduction for the premium paid on a child education plan is available up to a limit of Rs. 1.5 lakh per year. The Income Tax Act, Section 10, gives tax benefits on the maturity amount (10D). These are the key benefits of child education plan can bring, aside from being a great investment strategy. However, tax laws are subject to change from time to time.
Partial Withdrawal Offers
You can take money out of the policy at any time during the policy's term to support a unique course your child wants to take, such as learning an instrument or acting. Certain programmes will offer you a monthly stipend to help you afford the costs of improving your child's skills.
Add-ons/Riders Selection Options
Even if you've bought the best savings plan for your child, you should add rider benefits to it. You can choose a child plan for education with a premium waiver if something unfortunate happens to the policyholder during the policy term, as well as additional rider benefits.
What Are the Various Types of Child Education Plans?
A child plan for education is offered by almost all insurance companies as a critical insurance product in their portfolio. These child plans can vary based on a variety of factors such as the individual's preferences and needs, and they come with a variety of customization and tailor-made features. In India, there are several categories of child plans :
Single-Premium Child Plan
The policyholder pays a lump sum amount in the form of a single premium for the duration of the policy and is relieved of the burden of remembering premium payment dates. You won't have to worry about coordinating finances for the premium payment. Some insurance companies also provide attractive discounts or lower premiums on child coverage.
Regular Premium Child Plan
Unlike a single premium child education plan, a regular premium child insurance allows you to pay your premiums whenever it is convenient for you. Monthly, quarterly, half-yearly, or annual premiums are available.
A child ULIP plan provides you with a three-year benefit, as well as increased insurance coverage, equity market contributions, and disciplined investments. Future premiums are waived, and the maturity amount is paid when the policy matures, ensuring that your children's future dreams come true. However, please note that Unit Linked Life Insurance products are different from the traditional products and are subject to market risks.
Traditional Child Endowment Plan
A typical child endowment plan is simply a traditional life insurance plan that offers stability and savings to children. It allows you to save over time and receive a lump sum payment when the insurance matures. A child endowment plan will serve as a financial vehicle for achieving financial goals for the benefit of your child.
How Does it Work?
A child education plan can be set up as an endowment policy, a unit-linked insurance policy, or a money-back plan.
Money-back Child Plans
The money-back plan is currently the most popular. This programme ensures that your child will receive survival assistance at regular intervals. These plans are ideal for people who require a lump sum payment at regular periods and assistance with life stage planning.
Unit Linked Insurance Plans are non-traditional plans whose returns are subject to market conditions. The sum promised would be received by the child as a lump sum in the event of the parent's death. This includes the waiver of all future premiums as well as the fund's worth upon maturity.
Endowment-based Child Plans
The Endowment Plan could be the third operational child plan instrument. On maturity, you will get a lump sum payment as well as bonuses under this programme. This is advantageous since it allows you to budget for your child's future expenses, such as higher education. This differs from ULIPs in that it allows for a minimum guaranteed payment.
How to Get the Best Education Plan for Your Child?
There are numerous child plans available from insurance companies; however, certain factors should be considered when selecting the best child plan to ensure your child's best future. The following pointers can assist you in choosing the best option for your child's needs.
It is recommended that you begin investing for your child's future as soon as possible. This will help you establish a larger corpus, which will provide you more freedom in making financial decisions. A child plan for education includes a maturity benefit and begins paying out at major life milestones once the child reaches the age of 18. If one begins investing early, the overall benefit of the best child education plan is greater.
Consider Economic Variables
It's crucial to remember that your child's savings and investments will only be utilised in the coming years. When settling on a suitable sum assured, a number of economic considerations must be considered. Inflation, rising education costs, and rising healthcare costs, among other economic issues, if correctly accounted for, will give sufficient funds for the child in the future. This can be combated using the best child education approach.
Pay Special Attention to Terms and Conditions
You should read the fine print and fully comprehend the terms and conditions of the policy document for child education programmes. The finest child plan has distinct characteristics that must be accurately interpreted. This will eliminate any uncertainty during maturity and/or pay-out. It will also assist in the selection of the optimal education plan for the child's needs, based on specific requirements.
Choose the Premium Waiver Benefit
Insurance firms frequently offer to waive the premium in the event of your untimely death during the policy's term. This is referred to as a premium waiver benefit or premium self-funding. It aids in the continuation of the policy without putting the family, particularly the child under pressure.
Option for Partial Withdrawals Clause
Emergencies can strike at any time, and the child may want financial assistance to get through them. Partial withdrawals allow for the withdrawal of small amounts of money from the best kid education plan to cover unexpected needs.
It's vital to budget for your child's education ahead of time. A child plan for education can help you be financially prepared for any challenges that your child's career may face. You can start today by paying a little charge to ensure that you are future-ready.
The article is meant to be general and informative in nature and should not be construed as solicitation material. Please read the related product brochures for exclusions, terms and conditions, warranties, etc. carefully before concluding a sale.
Make responsible financial decisions. Consult with your financial advisor before making any decisions on insurance purchase.