What To Know About Child Education Insurance Plans
Mini Balakrishnan
As parents, we want nothing but the best for our children, and the soaring expense of higher education is a major cause of anxiety. As a result, many parents are looking at ways to save money for their children’s education, with child education insurance plans being a common choice. A Child Education Plan aims to help parents save money for their children’s college costs. Parent’s interest in these policies has grown over time due to the growing expense of higher education.
This article will explain what a child education insurance plan is and the types of child insurance plans that can help you decide whether they are a good way to pay for your child’s college education.
What Is A Child Education Insurance Plan?
Investing money in a child’s education plan can be a smart financial decision for many families. It helps parents save for their child’s future education expenses and provides financial security in unforeseen circumstances. Investing in a child education insurance plan offers several benefits, including:
- Financial Security
- Tax Benefits
- Guaranteed Returns
- Flexibility
- Long term savings
Financial Security
A child education plan provides financial security in unforeseen circumstances, ensuring the child’s educational goals are not compromised.
Tax Benefits
The premiums paid towards a child education plan are eligible for tax benefits under Section 80C of the Income Tax Act, providing additional savings.
Guaranteed Returns
Some child education plans offer guaranteed returns on investment, providing a fixed sum of money at maturity or in the event of the policyholder’s death.
Flexibility
Child education plans offer flexibility in terms of premium payment options, policy terms, and coverage amounts, allowing parents to customize the plan according to their financial goals and objectives.
Long-term Savings
Investing in a child’s education plan is a long-term savings strategy that helps parents save for their child’s future education expenses and provides a disciplined approach to financial planning.
Overall, investing in a child education insurance plan is a wise decision that helps parents secure their child’s future and provides them with the necessary resources to achieve their educational goals.
Why Should You Invest in a Child Education Insurance Plan?
More than regular monthly savings will be needed to cover the rising expense of higher education. Your kid should be given every opportunity to succeed in today’s challenging world, and money shouldn’t be one of those barriers. You may tailor your investment in a child’s insurance plan to meet your family’s specific financial situation, financial objectives, and plans for your child’s education.
Insurance policies for children often provide a death benefit equal to 10 times the yearly payment. These plans also provide for a partial withdrawal if it becomes necessary. In addition, you may deduct the cost of your premium from your taxable income.
Types of Child Education Plans
There are several types of child education insurance plans in India. Some of the most common ones are:
- Endowment plans: These plans offer a guaranteed sum assured and provide a lump sum payout at maturity or in the event of the policyholder’s death.
- Unit-linked insurance plans (ULIPs): These plans invest a portion of the premium in the equity and debt markets, allowing policyholders to benefit from market fluctuations.
- Money-back plans: These plans offer periodic payouts throughout the policy term to meet the child’s educational expenses.
- Education savings plans: These plans are designed to save for the child’s education expenses and offer tax benefits under Section 80C of the Income Tax Act.
- Child insurance plans: These plans offer life insurance coverage to the child and financial protection to the family in the event of the policyholder’s death or critical illness.
The type of plan chosen depends on the policyholder’s financial goals, risk appetite, and investment objectives.
Benefits Of Educational Programs for Kids
Insuring a Person’s Life
Life insurance is included in Child Education Plans, with an amount guaranteed that may be as much as ten times the yearly cost. The Insurance Regulatory and Development Authority of India, which oversees the insurance sector in India, recommends this maximum life insurance coverage (IRDAI).
Potential Investments
Policyholders of Child Endowment Plans are not afforded the luxury of picking and choosing among several investment options. Investments made on behalf of policyholders are generally Debt assets like Government Bonds, Corporate Bonds, Treasury Bills, etc., and are selected automatically by insurance firms.
Child ULIP Plans, on the other hand, provide policyholders a say in how their funds are invested. But, you may only choose from the money the Insurer manages. Comparatively, ICICI Smart Child Solution provides policyholders with 13 fund selections spanning Equity, Debt, and Hybrid Fund categories, while SBI Smart Scholar only provides access to 9.
Tenure Commitment
In India, the minimum commitment length for both kinds of Child Education Programs is 5 years. Most Child Plans allow for a partial withdrawal beginning in the sixth year. When the five years are over, the policyholder has the option of cashing out their whole investment and surrendering the insurance.
Charges
The policyholder is responsible for paying various fees associated with Child Education Plans. Fund administration fees, premium allocation fees, policy administration fees, etc., all fall under this category.
Gains from taxes
The life insurance portion of the kid policy makes the premiums eligible for a tax credit under Section 80C. The sum of all contributions to tax-saving instruments like Tax Saver ELSS Mutual Funds, Public Provident Funds, Workers’ Provident Funds, Life Insurance Policies, etc., cannot exceed Rs. 1.5 lakh u/s 80C.
If your yearly premium is less than Rs. 2.5 lakh, 100% of your payment will be free of taxes. The payment will be taxable as a capital gain if the yearly premium exceeds Rs. 2.5 lakh. The Finance Bill of 2021 includes this amendment.
Conclusion
In conclusion, a child education insurance plan can provide financial security and help parents achieve their child’s educational goals. It offers numerous benefits, including tax benefits, flexible payment options, and protection against unforeseen circumstances.
Choosing the best child education insurance policy in India requires careful consideration of the policy’s features, coverage, and benefits. By investing in a child education insurance plan, parents can secure their child’s future and provide them with the necessary resources to achieve their dreams. It is an investment in their future that will pay off in the long run.
