Recently, Rohit, a new parent to a baby girl, embarked on the journey of securing his child’s future. Recognising the importance of financial independence, he explored various investment options, including Fixed Deposits, Mutual Funds, Child Plans, and Stocks. In this comprehensive guide, we will delve into the world of Child Plans, decoding their significance, types, flexibilities, and considerations for choosing the best plan in India.
What is a Child Plan?
A Child Plan is a financial product meticulously designed to assist parents in accumulating funds for their child’s future needs, primarily education and significant life events. Unlike generic savings plans, a Child Plan is tailored specifically to achieve these objectives, making it a more effective tool for long-term financial planning. Child Plans differ from standard savings plans by focusing on the child’s future milestones. They ensure continued support for key life events, even in the absence of the parent.
Benefits of Child Plans:
• Education Funding: Child Plans ensure sufficient funds for a child’s education, covering tuition fees, books, and other educational expenses.
• Future Planning: These plans extend beyond education, assisting in other life events such as marriage or home purchase.
• Financial Security & Life Cover: In unfortunate events, Child Plans provide built-in features to ensure continued benefits, safeguarding the child’s financial well-being.
• Disciplined Savings: Child Plans foster disciplined savings through regular premium payments, instilling a savings habit.
• Long-Term Wealth Creation: Child Plans, especially those with equity exposure, serve as a means of long-term wealth creation with the potential for higher returns.
Types of Child Plans:
Child plans offered by life insurance companies are either unit-linked or traditional savings plans, fully or partly guaranteed.
Lock-in Period and Flexibilities:
Unit-linked child plans have a 5-year lock-in period, providing flexibility for withdrawals from the accumulated fund value after the 6th policy year. These plans offer customizable policy terms, premium payment options, and optional riders for enhanced coverage.
Investment Strategy:
Child Plans, such as ICICI Prulife’s, offer diverse investment options, including equity, debt, and balanced funds, reflecting the company’s underlying fund philosophy.
Ownership and Documentation:
Child plans are typically purchased under a parent’s name, with the child named as the beneficiary. Children are not required to submit Aadhar/PAN details during investment, simplifying the process for parents.
Maturity Periods and Premium Payment Options:
Maturity periods align with the child’s age, tailored to key milestones like graduation. Premium payment options are flexible, allowing monthly, half-yearly, or yearly payments, starting from a SIP of 5000 or any lump sum as assured.
Considerations for Choosing the Best Child Plan:
When choosing a Child Plan in India, factors such as plan type, premium flexibility, rider options, maturity benefits, lock-in period, fund performance, charges and fees, and claim settlement ratio should be carefully considered.
Companies Offering Child Plan
You can choose from a variety of child insurance plans available in India. These plans are designed to help parents financially secure their child’s future in a disciplined way. A few of the best child insurance plans in India are:
- HDFC Life Youngstar Super Premium Plan
- ICICI Pru Life Smart Life
- Aviva Young Scholar Advantage Plan
- Bajaj Allianz Young Assure:
- Bharti AXA Life Child Advantage Plan:
At the end of the day, armed with this comprehensive guide, Rohit has made an informed decision, securing the best for his little princess. While Child Plans offer a structured approach to financial planning, it’s essential to consult with a financial advisor for personalized advice. Next week, we will explore the viability of mutual funds in Rohit’s financial portfolio.
Disclaimer: This information is general and not a recommendation for any specific scheme. Before making any financial decisions, consult with a financial advisor to align with your goals, risk tolerance, and the specific needs of your child. Review and compare multiple plans for the one that best aligns with your financial objectives.