Securing a bright future for your child involves more than just providing for their immediate needs. It’s about planning for their long-term financial security with a Child Savings Plan and ensuring that they have the resources to achieve their dreams, whether it’s pursuing higher education, starting a business, or buying a home.
One effective way to achieve this is by starting a child savings plan with life insurance. This comprehensive guide will help you understand the benefits and steps involved in creating the right financial plan, ensuring your child’s financial future is secure.
Why Choose a Child Savings Plan with Life Insurance?
Dual Benefits of Savings and Protection
It offers dual benefits: it helps you build a financial corpus for your child’s future while providing life insurance coverage. This means that in the unfortunate event of your demise, your child’s financial needs will be taken care of, ensuring they can continue with their education and other plans without financial constraints.
Disciplined Savings Approach
These plans encourage disciplined savings as they require regular premium payments. This ensures that you consistently contribute towards your child’s future, helping you accumulate a substantial amount over time.
Tax Benefits
The premiums paid towards a child savings plan with life insurance are eligible for tax deductions under Section 80C of the Indian Income Tax Act. Additionally, the maturity proceeds and death benefits are tax-free under Section 10(10D), subject to certain conditions.
Steps to Start a Child Savings Plan with Life Insurance
1. Assess Your Financial Goals
Begin by identifying your financial goals for your child. Consider the costs of higher education, extracurricular activities, and other major expenses. For instance, if you aim to send your child abroad for higher education, you need to estimate the potential costs and plan accordingly.
Example:
Ravi, a father of a three-year-old, wants to ensure he has enough funds to cover his child’s higher education, which he estimates will cost around ₹50 lakhs in 15 years. He decides to start a child savings plan with life insurance that will help him accumulate this amount over time.
2. Choose the Right Plan
There are various child savings plans with life insurance available in the market. Compare different plans based on their features, benefits, and premiums. Look for plans that offer flexible premium payment options, higher returns, and comprehensive coverage.
Example:
Priya, a mother of a five-year-old, compares different savings plan for her child and selects one that offers a combination of equity and debt investments, providing balanced growth and stability. The plan also includes a waiver of premium rider, ensuring that the policy continues even if she is unable to pay the premiums due to unforeseen circumstances.
3. Understand the Policy Terms
Read the policy document carefully to understand the terms and conditions, including the premium payment term, policy term, and sum assured. Ensure that the policy aligns with your financial goals and provides the necessary coverage.
4. Opt for Riders
Riders are additional benefits that you can add to your base policy for enhanced protection. Common riders include waiver of premium, accidental death benefit, and critical illness cover. These riders can provide extra security and peace of mind.
Example:
Anil, a father of a two-year-old, adds a critical illness rider to his child savings plan. This rider ensures that if he is diagnosed with a critical illness, the policy will continue, and the child’s financial future remains secure.
5. Start Early
The earlier you start, the more time you have to accumulate a substantial corpus for your child’s future. Starting early also allows you to benefit from the power of compounding, which can significantly increase the value of your investment over time.
Example:
Suman starts a child savings plan for her newborn. By starting early, she has 18 years to build a substantial corpus, taking advantage of compounding interest to grow her savings.
Benefits of a Child Savings Plan with Life Insurance
Financial Security
It ensures that your child’s future is financially secure, regardless of any unforeseen circumstances. The life insurance component provides a safety net, while the savings component helps you build a substantial corpus for future expenses.
Peace of Mind
Knowing that you have a plan in place for your child’s future can provide immense peace of mind. You can rest assured that your child’s financial needs will be taken care of, even if something happens to you.
Flexibility
Many savings plan offer flexibility in terms of premium payment options and policy terms. This allows you to choose a plan that best suits your financial situation and goals.
Goal-Based Savings
It helps you save with a specific goal in mind. Whether it’s funding higher education, starting a business, or buying a home, these plans help you accumulate the necessary funds over time.
How Digibima Can Help
As an insurance aggregator in India, Digibima offers a comprehensive platform to compare various child savings plans with life insurance. By evaluating different plans based on features, benefits, and premiums, Digibima helps you find the best plan tailored to your needs, ensuring your child’s financial future is secure.
Conclusion
These plans are a smart and strategic way to ensure your child’s financial future is secure. By combining the benefits of savings and protection, these plans provide a comprehensive solution for your child’s needs. With the help of Digibima, you can easily compare and choose the best plan, ensuring peace of mind and financial security for your child’s future.
FAQ Section
Q1: What is a child savings plan with life insurance?
A1: It is a financial product that combines savings and life insurance coverage, helping you build a corpus for your child’s future while ensuring financial protection.
Q2: Why should I start a child savings plan early?
A2: Starting early allows you to take advantage of the power of compounding, which can significantly increase the value of your investment over time, helping you accumulate a substantial corpus for your child’s future.
Q3: What are the tax benefits of a child savings plan with life insurance?
A3: Premiums paid towards the plan are eligible for tax deductions under Section 80C, and the maturity proceeds and death benefits are tax-free under Section 10(10D), subject to certain conditions.
Q4: How do riders enhance a child savings plan with life insurance?
A4: Riders provide additional benefits such as waiver of premium, accidental death benefit, and critical illness cover, offering extra security and peace of mind.
Q5: How can Digibima help in choosing the right child savings plan?
A5: Digibima offers a platform to compare various insurance plans, helping you find the best plan based on features, benefits, and premiums.
