Planning for your child’s future is an essential part of parenting. One aspect of this planning involves ensuring that your child is financially secure, even in the face of unexpected events. Child insurance is a crucial tool that can help provide that security. In this article, Nonchinabr.com will discuss The Importance Of Child Insurance, and how it can help you protect your child’s future.
The Importance of Child Insurance: 6 Important Reasons
Build Education for the future
You can choose between two different kinds of child insurance plans:
- ULIPs, or unit-linked plans
- Cash-Back Programs
You have the choice to make regular investments in an equity fund with ULIP plans. Profit, therefore, from market performance. Additionally, it enables you to invest in debt funds. As a result, you can safely maintain the corpus you have built up over the course of your investment while simultaneously managing the investment risk associated with equity funds.
If you wish to stay away from the stock market, you can invest in debt funds under the ULIP plan, but you can also participate in endowment plans. These plans provide a guaranteed maturity value, so you know exactly how much money you’ll get at the end of the term.
Both insurance policies have a short term for paying premiums. So, you are not required to continue investing during the term of the insurance. You can choose to pay premiums for, say, 10 policy years or until your child turns 15 years old if your child is 5 years old and you purchase a child plan for 15 years.
He or she is eligible to start receiving yearly payments at age 18 to help pay for undergraduate school. Additionally, you will receive the guaranteed amount provided upon maturity along with any accrued incentives. This can be used for marriage or graduate school.
Indemnity for Disability – The Importance of Child Insurance
Life’s ambiguity is one of the toughest obstacles for you as a parent. Your ability to earn the same amount of money could be impacted in the event of a major impairment. To ensure that the child’s education is unaffected, the top child insurance plans in India reduce this risk and pay all upcoming premiums.
For instance, Canara HSBC Life Insurance’s Smart Future Plan pays the sum insured for a permanent, severe disability caused by an accident. The policy may keep going until it reaches the desired maturity value.
Aids in achieving future objectives
A number of child insurance plans include flexible and appropriate equity-debt proportions. The best potential returns on your investments are guaranteed by skilled fund managers. Some plans have automatic fund rebalancing options that guarantee a certain allocation regardless of market fluctuations.
Due to significant investments in equities, the returns in the majority of child plans are very strong and virtually always outperform inflation over the long and medium term. This not only prevents the money from eroding but also significantly increases it. Of course, traditional endowment plans are also offered in insurance contracts. The growth is often stable and predictable, although the returns might not be as great as with equity-linked programs. Your money is invested in bonds and government securities through endowment plans.
Unexpected costs and emergencies might happen at any time. Without compromising on long-term financial goals, a flexible policy that permits partial withdrawals for emergencies can help you get over short-term failures.
Loans and Loan Collateral
Higher education is expensive, and the expense increases if your child wants to attend a western university. There will always be a funding gap that must be filled by the students themselves, despite the significant scholarships awarded to deserving students. Only when there is substantial collateral and a co-signor are education loans offered by banks and non-banking financial institutions (NBFCs). The finest investments are insurance policies, since they offer both milestone-based payouts and reliable collateral for borrowing.
You can get a loan on a kid’s insurance policy directly from the insurer. The policy begins to build up a cash value (surrender value) after the lock-in term. As you continue to make investments in the policy, this surrender value keeps increasing. Therefore, you can apply for a loan against the policy if you ever need money for the child’s schooling before the policy matures.
Tax Advantages
Section 80C of the Indian Income Tax Act allows you to deduct up to Rs. 1.5 lakh of the premiums you pay for children’s insurance plans. Also tax-free are the maturity value and any partial withdrawals you make following the lock-in period.
The lock-in period for ULIP plans is 5 years, although it can be 2 years for endowment plans.
Protection Following the Policyholder’s Death
Some kid’s plans enable you to support your child’s education while also enabling you to leave a legacy. The coverage can fulfill your duty to pay for your child’s higher education and continue to insure you until you are 100 years old.
In other words, your child will inherit the agreed-upon amount from you in the event of your natural death.
Consequently, by making child plans, you can seek to achieve more than just your child’s life objectives. Just be careful to use the appropriate strategy for the situation.
Conclusion The Importance of Child Insurance
In conclusion, it cannot be overstated how crucial child insurance is for securing your child’s future. As a parent, investing in child insurance is one of the best decisions you can make to provide financial security and peace of mind. By understanding the importance of child insurance and taking action to protect your child’s future, you are making a wise investment that can yield invaluable benefits for years to come.
