A child insurance plan can provide the benefit of investment as well as insurance. It can help in securing your child’s future. In this article, we will explain why it is important to have a child insurance plan and its features.
After a child is born, nurturing it becomes one of the most important responsibilities of the parents. Hence, every parent wants to ensure they secure their child’s future. Good education can help in securing a child’s future. However, education can cost a lot of money. Thus, child insurance plans can be beneficial.
Child insurance plans help in financially securing a child’s future as well as making sure his/her education doesn’t suffer from any financial troubles. Hence, a child insurance plan can provide security and help in building a significant corpus for funding education.
Here are some reasons why purchasing a child insurance plan is important-
- It can Help in Funding Education
One of the most important concerns for any parent is his/her child’s education. However, the cost of educating a child is increasing. Hence, savings alone might not help in such a situation. Therefore, it is wise to purchase a child insurance plan. By purchasing a child insurance plan, a parent can lower his/her financial burden.
- It can Provide Financial Assistance Against Illness
While a child insurance plan can provide returns from investments, it can also offer insurance benefits. In case of an illness, a child insurance plan can provide financial assistance for paying the medical bills to treat the disease.
- It can be used as Collateral for Loans
A child insurance plan has a surrender value. Hence, a person can offer it as collateral to borrow a loan. The loan amount can vary based on the value of the underlying fund.
Features of a Child Insurance Plan
- Accurate Investment Term
Investing in any investment instrument might not be wise. This is because every investment option needs a specific tenure to offer the best returns. Hence, a person needs to look for a plan that offers the best long-term as well as short-term investment options.
For example, if there are many years before your child’s higher education, then a good child plan should offer a long-term investment option, such as equity funds. However, when the goal gets closer, the child plan should invest in safer investment instruments, like debt funds.
While selecting child insurance, a person should look for a policy that offers different investment options to increase the returns and safeguard the investment.
- Risk Mitigation
In case a parent is investing for a long term, he/she can take a little more risk by investing in equity funds. This can help in higher returns.
But by investing in equity funds, the risk gets higher. Furthermore, every person can’t keep track of his/her investments every time. Hence, a child insurance plan that provides automated portfolio strategies can be beneficial. Such plans can help in mitigating the risk. The best child insurance plans offer strategies such as systematic transfer option, safety switch option, etc.
- Tax-free Partial Withdrawal
The best child insurance plan should allow you to withdraw accumulated funds partially. With the help of partial withdrawals, the investor can save on taxes. However, a child insurance plan should also ensure that the partial withdrawals don’t affect the investment.