Different Kinds of Child Plans to Choose from
A child plan is available in the form of unit linked insurance plan (ULIP) and endowment plans. Unit linked insurance plans help to invest in the market to grow funds for the child’s future. Whereas endowment plans for children generally provide guaranteed fixed returns since these are essentially savings instruments. You can select the best child plan for yourself depending on your risk appetite and requirement.
A child plan generally offers two types of payouts - regular and lump sum. You can utilize the lump sum amount for major long-term goals of your child such as marriage and higher education which need a substantial amount. You can opt for regular payouts to ensure that the intermittent needs such as school fees for the new academic session, extracurricular fees etc. can be taken care.
Important Things to Look Out for Before Purchasing a Child Plan
Choosing a life insurance for kids can be a little complicated since there are a number of different options to choose from. Therefore, you must look out for some of the important factors before finalizing plan.
1. Sum Assured
The coverage or sum assured should be sufficient to cover all the education costs. You must also consider the major milestones and plan accordingly, keeping inflation in mind.
The premium also plays a vital role in selecting the best child plan. When you start early you can get a good sum assured on a pocket friendly premium.
There are two ways in which you can pay your premium. Lump sum, and monthly, quarterly or yearly premium.
3. Policy Term
The term of the child insurance plan refers to the period for which the policyholder pays the premium. The longer the term, the higher the sum assured and lower the premium. It’s a good idea to plan for a long-term policy with at least 5 to 10 years of term.
4. Partial Withdrawal
Child insurance plans also offer a provides partial withdrawal benefit. This is helpful to meet the milestones of the child's education and other needs. So, you must always read the policy documents to understand whether your child insurance plan has this option or not.
5. Lock in Period
Most of the life insurance plans for kids have lock in periods where you are not allowed to make withdrawals. The details will be given in the policy documents. This lock in period is important to foster a discipline in your investing processes.
There are several additional riders available which can increase the weightage of the child plan. Since these Riders come at an additional amount to the premium, you must be careful to choose only the riders that are necessary.
The cost of living and education are rising day by day. So, it has become critical to ensure the financial safety of your kid. Child insurance plan provides safety as well as lump sum amount for your kid’s needs, giving you the satisfaction of having secured your child’s future.