CHILDREN EDUCATIONAL PLANNING

"Financial planning is crucial to safe your child’s future"

What is Children Educational Planning?

A child insurance plan is a combination of insurance and investment that ensure a secure future for your child. Life cover is available as a lupsum payment at the end of policy term. Not just this, these plans also provide flexible pay-outs at important milestones of your child’s education. While one may not want to think about unfortunate situations like death or serious medical illness, it’s important that you shield your child’s future against such incidents. Max Life Child Insurance Plans ensure that your child’s future financial needs are taken care of even in your absence.

Benefits of Child Plan?

While planning and managing your family’s finances, you devote a reasonable amount of time on your child’s future. Major requirements like child’s higher education need substantial savings, given the rapid rise in education costs. This involves regular investments made over many years so that you can accumulate the required savings. Equally important is the need to secure the child’s future in the event of your untimely absence. The issue then arises that given the paucity of time most parents have, can all financial requirements related to child’s future be met by one financial product? Luckily, life insurance companies offer child plans or children plans that combine financial protection for the child along with a child education plan. If you find the idea of this combination of protection and children education plan attractive, you need to be aware of the key benefits of children plans.

Protection with waiver of premium

A children insurance plan, like other life insurance policies provide life insurance coverage to dependents. In this case, the protection is meant for the child. The life insurance amount from the child plan can be used to meet the immediate and regular needs besides meeting future needs of the child in the event of the untimely demise of the insured parent.

Providing for immediate needs

To provide for the child’s regular needs, the life insurance coverage from children plans provide the money to help the family meet regular expenses such as those related to school education.

Addressing future needs

A children future plan also provides money for higher education. In case of the untimely demise of the insured parent, many child plans have what is a called premium waiver feature that ensures that the child plan remains in force for the remaining part of the policy term. The policy premium is paid by the life insurance company. The money invested so far, remains invested till the end of the policy term and then money is paid to the child which can take care of higher education expenses.

Regular investment for child’s higher education

A children’s plan works equally well if the unfortunate event doesn’t take place. You invest regularly throughout the term thanks to your premium payments. If you opt for a child investment plan in the unit linked insurance plan (ULIP) category where a portion of the premium is invested in buying units of a fund, money growth may well be high. This typically takes place when you invest in ULIP equity funds. Over the long tenure of the ULIP, the value of the units grow well since equity investments typically provide high returns over 8-10 years, or more. As you near the time when you need to use the money, you can move the money to a lower risk ULIP fund and ensure that the gains that you have made over time are secured. The movement of your money to another ULIP fund is typically done free of cost.

Tax benefits

This is the icing on the cake. Besides the protection benefits and helping you save substantial amounts, a children education plan helps you save tax. You are not only eligible for annual deduction from your total income of upto Rs 1.5 lakhs under Section 80C of the Income-tax Act, 1961, for premiums paid for child plans but you also benefit from tax free maturity proceeds under Section 10(10D) of the Income-tax Act, 1961, subject to fulfilment of the terms and conditions stated therein. Like every parent, if you dream big for your child’s future, you must do the small things right. This means a plan to have financial protection in place in case of the unfortunate event and ample savings for child’s future needs if things stay on course.