One of the major concerns for parents raising their children is to make them safe and financially sound. Now, there are special insurance policies meant for this: child plans. Therefore, it becomes very critical to have long-term financial security through such child plans. This blog will help you navigate all issues involved in choosing the right insurance policy that best suits your child’s needs.
What Is a Child Plan?
Child plans are insurance products that are designed to generate a sum in the corpus for specific events related to your child, like higher education, marriage, or other important life events. You have to provide financial support for your aspirations in your child’s life through the child plans even after your death. Broadly speaking, there are usually three types of child plans:
Traditional Endowment Plans
Traditional endowment plans are simple insurance products to ensure safe returns and financial security for a stipulated period. The following is how they work:
Stable returns: Traditional endowment plans come with stable returns in the form of bonuses over and above the assured sum. These normally start accruing from the second year of the policy onwards and provide a predictable income stream.
Long-Term Savings: These plans combine insurance coverage with a long-term savings scheme. At the date of maturity or death, the policyholder either gets, upon maturity, or the nominee gets at the time of death, the assured sum along with the bonuses accrued to the policy in the form of a lump sum.
Single-Premium Child Plan
A single-premium child plan is a plan prepared mainly for those policyholders who would prefer to make a lump sum ante investment rather than periodic premium payments.
Immediate Cover: The Insurer gives the immediate insurance cover to the policyholder and starts getting returns on the investment made by him; there is no hassle for further premium payment.
Financial Flexibility: Many insurers offer great discounts or reduced premium rates for the same type of benefits offered in single-premium child plans. Hence, this makes for an ideal way to secure a child’s future through a substantial one-time investment.
Regular Premium Child Plan
The regular premium kid plan is the one that offers policyholders freedom in terms of how often they pay their premiums.
Flexibility under the Payment Schedule: This factor is absent in single premium plans; in regular premium child plans, the premium is spread over some stipulated period of the policy. Such flexibility of premium allows adjusting the premiums according to a policyholder’s financial capabilities and cash-flow requirements.
Budgetary Control: A regular premium payment allows them to keep a grip on their budgeting and financial planning. The frequency at which they can pay the premium is flexible, and it aligns with their earning cycles and their finances.
Continuous Coverage: Payment of premiums at regular intervals proves to guarantee coverage throughout the term for an undisturbed financial protection and growth for the future needs of the child.
Key Features of Child Plans
To meet your child’s financial requirements, it is important to understand the main features of the child plans mentioned below:
Maturity Benefits: Child plans have maturity benefits accrued at milestones of your child’s life, whereby funds are then made available for higher education, marriage, or any other expense you may have planned.
Death Benefits: Child plans offer a death benefit in the case of an unfortunate demise of a policyholder to ensure that your child’s financial future remains secured. It thus ensures that despite unforeseen circumstances, your financial aspirations need not be compromised.
Premium Waiver: A very critical feature in which all future premiums get waived off in the case of death of a policyholder. The policy continues up till maturity and provides uninterrupted benefits so that your child, therefore, gets downright for his requirements through continuous monetary support.
Partial Withdrawals: A few child plans have partial withdrawal facilities that allow the policyholder to avail money for immediate monetary needs or emergencies, thereby avoiding the surrender of the full policy.
How to select the Best Insurance Policy for a Child Plan
Structuring the process of choosing the best life insurance policy for a child plan will involve several steps strategically.
Define Financial Goals: First of all, define your financial goals by illustrating what your child’s future financial needs could be: education expenses, marriage expenses, and other major milestones. Calculate the required corpus and determine the time frame for achieving these goals.
Review Your Budget: Be certain about your current financial situation and see how much you’re able to easily spare in premium payments. Consider how much you earn, the pre-existing expenses, and the savings which the premiums should fall within without putting a strain on your wallet.
Compare Policies: There are numerous online aids and tools which can be taken as an aid to compare various child plans in the market with precision. Compare premium costs, added benefits, investment strategies, flexibility in payout, etc. Check whether the policy secures your financial objectives and possesses the required features to meet your child’s needs in the future.
Claim Settlement Ratio: One can determine how reliable the insurer could be during a claim settlement through this ratio. Make sure to take out your insurance only from a rather high claim settlement ratio insurer. This owes to their credibility in not developing hassles for the customer by settling claims.
Understand the Terms and Conditions: The parent is to read the policy document and understand the terms, conditions, exclusions, and benefits attached to the child plan. Check carefully with the waiver of premium benefit to ensure that it is inbuilt that the policy shall continue unabated if the policyholder has passed away.
Conclusion
Choosing the best insurance policy for your child’s plan is a very sensitive and caring decision. You can ensure that in your child, a secure and bright future lies ahead by getting acquainted with the features and benefits of the plans in question and comparing them. Go for those policies offering good benefit options, flexibility in options, and thus having a reliable insurance provider to protect your child’s financial future from uncertainties in life.
Also Read: Millions of children at risk of losing health insurance as COVID-19 emergency coverage ends
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