Education planning is important to ensure the child receives the education he/she wants. By receiving the education a child desires, he/she will be able to achieve future goals.
Read on to understand why educational planning is crucial for children.
Every parent’s goal is to provide their child with a great education. However, the cost of education is getting expensive every year. Therefore, it can cost a huge amount of money when a child requires funds to pay for the education costs. A child education plan can provide financial help to parents in order to fund their child’s future education.
What are Child Education Plans?
Child plans are a type of insurance policies that allow parents to accumulate funds for their child’s education. Furthermore, these plans can provide them with life cover. Thus, in the event of a parent’s demise, the insurer can provide a sum assured to fund the child’s education. Hence, child plans can allow parents to build a corpus while providing their child with financial security.
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Primarily, there are two types of child plans-
- Endowment Plans
- ULIPs
Endowment Plans
Endowment plans offer life cover and guaranteed returns. Generally, these plans make 4 payouts. Each payout provides 25% of the sum assured. Endowment plans can also provide bonuses.
ULIPs
A unit-linked insurance plan (ULIP) is a product that offers life cover and investment benefits. When a policyholder pays the premium of a plan, a part of it goes towards life cover, the other part is invested in different investments. The investments are made in equity and debt funds.
As this plan offers child insurance, the insurer can provide a sum assured in the event of the parent’s death. Therefore, a child can get financial protection in case of an unfortunate event. Furthermore, this plan provides maturity benefits. The funds generated can be used to pay for the education expenses. Hence, this plan offers financial protection to a child and allows parents to build a corpus for education costs.
Benefits of Child Plans
Child plans are important for education planning. These plans enable parents to fund their child’s education. Here are some of the benefits of child plans-
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Investment Benefits
In case of ULIPs, the policyholder gets the benefit of selecting the investments. An insured person can choose between equity and debt funds. The policyholder will receive returns based on the funds selected. Hence, such plans allow parents to build a corpus to finance their child’s education.
Endowment plans don’t offer the benefit of choosing the investment options to the policyholders. The choice is with the insurance providers, and they invest in debt investments like government bonds.
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Life Cover
Apart from investment benefits, child plans can also provide life cover. In the event of the parent’s death during the policy term, the insurer can offer a sum assured. Hence, these plans can financially secure a child’s future in the event of the parent’s death.
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Allows Partial Withdrawals
Child plans can also offer the benefit of partial withdrawal. During the tenure of the policy, an insured person can withdraw money partially to finance education expenses. There are some plans that offer periodic payouts.
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