Before getting into the benefits of child plans, it is important to know very clearly what a child plan is and how it works. Two basic categories of child plans are actually available:
Child Insurance Plan: In this, the child’s financial future is secured. This again has two types:
It is a safer option of insurance as it guarantees a return in the form of Maturity amount after the time of maturity. This insurance policy can be further divided into two categories, Child endowment, and Child money back schemes.
Aggressive Insurance Policy:
This is a risky venture as the return is based on the condition of the market. At the time of maturity, if the market is high the return will be high and if the market is low, the return will be low.
Child health plan:
A child health plan is chiefly a health insurance policy that is designed to cover children and babies for all their health requirements. They are more prone to diseases than adults as their immune system develops over a period of time. On the whole, children require visiting the doctors a lot more than a healthy adult. That is where a child health insurance plan comes out handy as you do not have to worry about the Hospitalization or treatment fees.
Why does one need a child health insurance plan?
A child is more prone to falling sick, incurring injuries and requiring hospitalization. Also, a child is dependent on his or her parents so if parents are disabled or die suddenly, the child has the insurance company to turn to for financial support. If a child has a child health plan, he or she brings fewer burdens to the family when unwell and in the need of expensive treatment.
There are several benefits of a child plan:
Investment and Insurance combined
As child insurance plans are investment plans, they unite the benefits of insurance and investment. While conventional plans give out the guaranteed amount, ULIPs are market-linked and the returns are determined by the performance of chosen funds.
Child plan is a methodical and disciplined way to save for the child’s future. You are forced to put the money regularly without fail due to the fear of Lapse of policy in which case you lose the full amount. So, irrespective of the financial condition, it has the major probability to be continued till maturity. But, it is advisable to compare the child plans to get a plan for which you have to pay the lowest possible premium.
Building a Corpus
Based on your appetite for risk, you can choose between traditional or a unit-linked child plan. With several advantages and disadvantages attached to each type, you will still be able to build a sufficient corpus with the help of a child policy that will come handy at the time of financial emergency.
Critically Chosen Maturity Date
You can choose the maturity date in such a way so that it matches with the requirement of the child, for example, the maturity date of a plan can coincide with the estimated date of high school final so that the maturity amount can be used for higher studies of the child.
Waiver of Premium
One of the best benefits of an insurance plan would be the “waiver of premium”. In case, if anything unfortunate happens to the parent, anytime after buying a child plan, the premiums get waived off and the child insurance maturity benefits are passed on to the child, as planned by the parent, on maturity.
It is important to compare child plans before buying so that you get the maximum benefit.