Every parent wants to secure their child’s future, especially financially. A child insurance plan can be a smart move, providing the support needed to meet their life goals, even in your absence. By investing in a child plan, you are helping to ensure your child’s dreams are within reach, no matter what.
Child Insurance Plan & Its Features
Child insurance plans offer a disciplined approach to goal-based wealth creation, tailored for long-term life goals. Available in both guaranteed and market-linked options, these plans typically mature when the child reaches 18 to 25 years of age, ensuring a steady financial future.
These plans provide crucial support by offering an immediate lump-sum payout if the parent passes away, along with waiving all future premiums. This means that even if several years of premiums remain, the insurer covers them, ensuring the policy stays active and continues to provide all its benefits. This setup guarantees that the family receives financial support, and when the policy matures, the payout provides essential support for your child’s major milestones.
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Advantages of Purchasing Such a Plan
The biggest advantage of a child insurance plan is the discipline it brings to saving. You might wonder, why not just go for a regular insurance product? While regular insurance, like a term plan provides a death benefit with a lump-sum payout, a child plan provides focussed savings for your child’s life goals.
For instance, if you’re saving Rs 2 lakh every year to build a Rs 1 crore fund over 15 to 20 years for your child, a term plan might provide a lump sum—maybe Rs 50 lakh or Rs 1 crore—if something happens to you. That lump sum payout, however, could be used for various pressing needs. This may disrupt your financial plan for your child.
Child plans, however, are crafted for long-term goals, not short-term expenses. They’re designed to support milestones like higher education, marriage, or starting a business, ensuring the funds you set aside are used for their intended purpose.
Market-Linked vs. Guaranteed Child Plans
There are two types of child insurance plans, guaranteed and market-linked. In a guaranteed plan, cash flow is fixed upfront, offering stable, predictable returns. Market-linked plans, on the other hand, fluctuate with market conditions, making them better suited to those comfortable with risk.
Market-linked plans are popular among those who understand that over the long-term , equity markets may deliver expected returns. These plans can be a great fit for those open to growth potential and market ups and downs. Meanwhile, guaranteed plans are ideal for people who prefer a steady, no-risk approach and want certainty without market fluctuations.
Right Age to Buy a Child Plan
Parents with young children, particularly those under 7 or 8, often find child insurance plans appealing. Starting early provides a longer horizon to build a substantial fund through the power of compounding, considering increasing expenses.
By planning ahead with a child insurance plan, you create a dedicated financial cushion that grows alongside your child, ready to support their big dreams. So, give yourself and your child the advantage of time. Start investing today and pave the way for a secure, goal-focused future.
(By Madhu Burugupalli, Sr. EVP & Head of Products, Bajaj Allianz Life)
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