How does a Child Insurance Plan Protects your Child’s Future Goals?

2024-08-02

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Children are full of possibilities and aspirations. As a parent, you would want to make sure they can achieve whatever they want to do. Higher education plays a major role in ensuring a brighter future for your child.

Irrespective of what stream your child has opted for, a good university and a reliable course will ensure your child’s secure future. As a parent, your prime responsibility is to make sure your children can receive the higher education they need to build their successful careers. You can kick start securing your child’s future with the best child insurance plan.

benefits-of-buying-the-best-child-insurance-plan

Role of Life Insurance Plan in Protecting Your Child’s Goal

Child ULIP and endowment life plans are the types of investments that can protect the goal during your life and even after your demise.

1. Multiple Fund Options

You can invest in equity, debt and hybrid funds through ULIPs while availing all the other benefits of the plan. Some of the best ULIPs like Invest 4G from Canara HSBC Life Insurance can offer up to eight funds for investment.

2. Bonus Additions

ULIPS can offer bonuses for long-term and disciplined investors. So, if you are a regular investor and invest for a longer term you can expect higher growth.

Invest 4G ULIP offers the following two bonuses:

a) Loyalty Bonus for staying invested for more than ten years

b) Wealth Boosters for regular investments

3. Life Cover

Your ULIP child plan is also a life insurance plan. Hence, there is a life cover attached to it. The life cover ensures a minimum sum to the family in the case of your early demise.

4. Goal Protection (Premium Protection Option)

In case you are no more, your ULIP child plan will offer your family the sum assured, and with that, the policy will end. Now, there is a unique feature that makes your ULIP child plan different from an ordinary plan. That is the Premium Protection option.

The Canara HSBC Life Insurance Guaranteed Savings Plan offers this Goal Protection feature.

In case you pass away during the policy term:

a) Your family will get the guaranteed death benefit; and

b) All the outstanding premiums shall be paid by the insurance company till the policy maturity.

5. Tax Savings

Last but not the least, your ULIP child education plan is a tax-friendly investment instrument. All the accrued bonuses that you will receive at the end of your policy are tax-exempt 10(10d) of the Income Tax Act. Besides, you can avail tax deduction u/s 80c of the Income Tax Act on the returns from your ULIP child plan. However, the tax exemption on accrued bonuses u/s 10(10d) is limited to INR 2.5 Lakhs.

Now you can easily decide what is the best investment for a child's education.

Cost of Good Higher Education

The cost of education has been one of the fastest-growing expenses in India. The average cost of an engineering course in India from a reputed institution can go up to ₹ 5 Lakhs per annum. The fee for private colleges is even higher than the public ones.

Here is an estimate of the educational cost, if your child enrols into a 4-year engineering course in any stream:

a) Premium Publicly Funded Institutions in India: The cost would go around ₹ 4-5 Lakhs per annum

b) Premium Private Institutions in India: The total cost would be somewhere between ₹ 12 to 20 Lakhs

c) Premium Foreign Institutions in the UK and the USA: If she/he manages to get enrolled into one of the top universities from the US, UK or EU, the cost can even go beyond ₹ 1.5 Crores

Learn how to plan for the best higher education of your child.

Effect of Inflation

Now, if you compound all these costs with the inflation rate, the amounts will grow to be much higher in 10 years. The inflation rate in higher education has been about 5 – 10% p.a. in India and 3 to 5% p.a. in more developed countries.

Thus, you not only need a good investment option to beat inflation as well as tide over the taxes, but you also need to protect the goal. You can do so, by either:

- Investing money in good instruments and buying a separate term life cover, or
- You can invest in a life insurance plan which also protects your child’s goal

Investment Options as per Risk Appetite – Equity or Debt

Various investment instruments can work as a child education plan. Depending upon your risk appetite, you can invest in different instruments:

1. Investing Safely

You need to safeguard your savings from the three risks – inflation, taxes and market volatility. Thus, you have the option of investing in the following:

Endowment life insurance plans
ULIPs with debt fund option
Public Provident Fund (PPF)

All three options offer safe and tax-free growth to your money. However, there are a few limitations there:

Limitations in an Endowment Plan

Returns are guaranteed but fixed
Investing in regular premiums is important
Long-term investors may receive additional bonuses
Partial withdrawals are not available. However, you can borrow money against the policy

ULIP Limitations & Advantages

Debt funds do not guarantee returns but offer a safe yet market-linked return. Returns are linked to the debt market instead of equity.
Partial withdrawals are available after the five-year lock-in period
Regular investment in the lock-in period is important
Bonuses are available to long-term investors

Public Provident Fund Limitations & Advantages

The maximum annual investment is limited to Rs 1.5 Lakhs
Returns are backed by a sovereign guarantee
Annual investments are not compulsory
No life cover benefit

Aggressive Growth

If your investment risk appetite allows, you may want to aim for higher growth for the investment term. Equity is one of the most promising and well-regulated aggressive investments. Here’s how you can allocate your money to equities:

Invest in ELSS (Equity Linked Savings Schemes)

These are pure equity mutual fund schemes with tax-benefits
These funds have a three-year lock-in period for every unit you buy
Returns may face long-term capital gain tax if the gains exceed Rs 1 lakh
No option of life cover with the investment

ULIPs with Equity Fund

Enjoy tax benefits with equity fund investment
Choice of aggressive and passive funds
Goal protection option to continue the investment even after your untimely death
The bonus may be available for long-term investors

Buying a child insurance plan will ensure that your children will not face any financial worries if something happens to you. Life is pretty unpredictable and hence, you should be prepared to protect those who you love.

Here How You Can Secure Your Kids Future Before They are all Grown Up

How does a Child Insurance Plan Work?

Child Insurance - Top Selling Plans

We bring you a collection of popular Canara HSBC life insurance plans. Forget the dusty brochures and endless offline visits! Dive into the features of our top-selling online insurance plans and buy the one that meets your goals and requirements. You and your wallet will be thankful in the future as we brighten up your financial future with these plans.