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How to choose the best child plan in 2017?

November 04, 2016 12009
It is natural for parents to wish the best for the child. When it comes to some of the more important milestones in their children's lives like education, marriage or buying a house, parents do not like to fall short, least of all financially.

Benefits of child plans

This is how child plans can help parents provide a better future to their children:

  • Education - is getting more expensive by the year. Inflation in education probably outscores inflation in every other sphere of life
  • Marriage - an occasion that comes in the lives of your child, so you want to make it as unforgettable as possible
  • House - prices are so high that for many owning a roof over the head is a dream that stays just that. Parents would like to provide their children with a house by contributing at least towards the downpayment.

Child plans can play a role in helping parents realize all this and more.

How child plans work

By setting aside money towards a child plan, parents can amass a significant corpus over a period of time. The money can then fund the aforesaid objectives.

Child plans are available in two variants -

  • traditional or endowment plans which invest in debt investments like government securities (gsecs) and corporate bonds among other options.
  • market-linked or unit-linked plans (ULIPs) which invest in equities

Parents must choose an option that is best suited to their objectives and risk appetite.

Importance of riders

While planning for child's future, it pays to make a comprehensive plan so as to cover all possibilities. One way to achieve this is through riders.

Simply put, a life insurance rider is an add-on that enhances the cover of the primary plan in case of an event. Among many, here are two riders in particular that can add value to the child plan:

  • Premium waiver
    Most child plans offer premium waiver benefit - either as an option or as an essential feature of the primary plan. The premium waiver is particularly important as in case of the death of the parent, the insurer waives off future premiums while continuing to fund the insurance policy till maturity. This makes sure that the maturity benefit that was set for a certain age remains intact as planned, in addition to the death benefit paid.

  • Accidental death/dismemberment benefit
    You can safeguard against accidental death or disabilities arising as a result of accidents, over the term of the child plan. In case of accidental death/dismemberment, the rider comes into play and pays out an amount, usually equal to the sum assured. The primary child plan continues and will pay out the sum assured on maturity.

 

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