For many mothers, safeguarding their child's future is a top priority. Child insurance plan offerings combine investment and insurance benefits, allowing mothers to build a secure fund for milestones like education, marriage, or emergencies. Let’s look at why these plans matter, especially for single mothers, and how to choose the right policy.
Why Child Plans Matter for Mothers?
Mothers often juggle multiple roles. For their children, they can be a caretaker, provider, and a primary source of emotional support. A comprehensive child plan ensures that, even in unforeseen circumstances, your child’s future remains secure. With family pension benefits and maturity payouts, these plans ease financial stress at critical life stages.
Importance of Child Plans
Financial Security:
A child investment plan builds a corpus over time. This corpus can cover future expenses such as higher education or marriage.
Insurance Cover:
Alongside savings, the policy provides life cover on the mother’s life. If the mother passes away, the insurer continues funding the plan, ensuring the child’s needs are met.
Tax Benefits:
Premiums for these plans qualify for tax deductions under Section 80C of the Income Tax Act. Benefits received may also be eligible for tax exemptions based on prevalent tax laws.**
Special Considerations for Single Mothers
Steady Income:
Without a co-parent for you child, budgeting for premiums requires careful planning.
Emergency Fund:
Build an emergency fund to avoid disruption in premium payments.
Tips for Single Mothers:
i) Choose a plan with flexibility in premium payment frequency.
ii) Opt for policies that offer waiver of premium in case of critical illness or death.
iii) Consider riders like critical illness cover to enhance protection.
Types of Child Insurance Plans
Regular Premium Plans
- You pay a fixed premium at regular intervals (monthly, quarterly, or annually).
- Maturity benefits (lumpsum or instalments).
Single Premium Plans
- You pay a single premium at the start.
- The plan grows over time with the insurer’s guaranteed returns.
Unit-linked Child Plans (ULIPs)
- A single premium can get you the possibility of two benefits – life cover and maturity benefits.
- Maturity returns depend on market performance, offering higher growth potential for investors with a higher risk appetite.
Endowment Plans
- Combine insurance and savings with guaranteed returns.
- Suitable for conservative investors seeking stability with maturity benefits alongside future security for their child.
Buying a Child Investment Plan
When setting up a child investment plan, consider the following steps to ensure the right optimisations of your policy:
Determine Objectives
- Estimate expenses for milestones like higher education or foreign studies.
- Factor in inflation, especially for child education abroad. Costs can double every few years.
Calculate Required Corpus
- Use online calculators or consult a financial advisor.
- For example, if you need ₹20 lakhs in 15 years, work backwards to determine the annual or monthly investment.
Choose the Right Product
- There is a range of investment plus insurance products available that can help you build future security for your child.
- Instead of choosing a popular or easily available product, choose a plan based on your requirements, goals, and budget.
Select the Tenure
- Often linked to the child’s age and target milestone.
- Plans typically mature when the child turns 18 to 21 years of age.
Key Benefits of Child Plans for Mothers
Life Insurance:
Child plans serve as a hybrid financial tool, combining life cover and investment. If something happens to the policyholder/life assured parent, the insurer may waive future premiums, ensuring the plan stays active.
Riders:
Adding riders such as accidental death benefit, critical illness cover, or waiver of premium can create an additional layer of protection.
Flexibility:
Some child plans allow partial withdrawals or a loan against policy, offering liquidity in emergencies.
How to Choose the Best Child Plan?
Step 1. Assess Your Risk Appetite
- Conservative investors may prefer endowment or traditional plans.
- Individuals willing to invest in a higher market risk profile can opt for ULIPs.
Step 2. Compare Returns and Charges
- ULIPs have fund management charges; check the expense ratio.
- Regular premium plans have straightforward structures, with clarity on returns.
- Remember to use a child plan calculator to have a better idea of your ideal investment and returns.
Step 3. Check Insurer’s Credibility
- Choose a reputable life insurance company with high claim settlement ratios.
Step 4. Review Policy Features
- Look for inclusions & exclusions, waiver of premium, rider options, and guaranteed additions.
A child insurance plan offers mothers the dual advantage of saving and protection. The importance of maternity and child plans cannot be overstated, especially for single parents who face additional financial pressure. With a thoughtful approach, you can buy a life insurance policy tailored to secure your child’s future milestones.
By building a robust child investment plan, mothers can ensure that their child receives quality education, chooses child education abroad, and enjoys financial stability. Start early, review options, and pick a plan that aligns with your goals and risk tolerance. In doing so, you provide more than just financial security; you give peace of mind and a brighter future to your child.
**Tax exemptions are as per applicable tax laws from time to time.
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