Foolproof Your Child’s Dreams With a Child Plan

by Jayant Harde Our associates have a rich corporate experience of

Someone rightly said, "Raising a kid is not the play of a kid." They were probably referring to the increasing cost of education. You know, IITs increased their undergraduate education charges from Rs 90,000/-p.a. in 2017. Rs 2,00,000/-p.a.Similarly, the fee for IIM-Ahmedabad's two-year flagship diploma program for the 2018 class was Rs 19.5 lakh. This is 400 percent more than what the 2007 B-school charged. If the leadership course charges continue to increase by 20 percent every year, it would affect Rs 95 lakh by 2025.These are also the expenses you pay for receiving admission to the required vocation / stream. But to get entry for these coveted seats, coaching starts much in advance. These days, parents are sending their children themselves for engineering and medical entrance training from age 13-14 to give them the additional edge required to fight the intense competition. Coaching courses pay about Rs 80,000-1,00,000/- per year. Interestingly, the price of coaching sometimes exceeds the real course charges.

As parents, we seek the best for our child and do not wish to see their dreams derailed in any manner. However, we need to be realistic and understand that fulfilling our child's dreams and ambitions can be a very costly affair.

According to the information collected by the Indian Banks ' Association (IBA), the complete exceptional education loan at the end of fiscal 2016-17 was Rs 67,678.5 crore.Although these statistics are holistic, they may also show that most parents did not plan early for their child's education and discovered themselves short of money in the face of increasing inflation leading to the choice to take a loan.

So, the key is to plan from the earliest to make the dream of your child a reality, preferably from the infancy of the child. And how can we do that? The response may probably be a family plan.

What is a Child Plan?

A family plan is a life insurance cum investment plan that helps a parent specifically plan and allocate resources for the future of their baby, be it higher education, setting up their own company or marriage costs. There are two versions of a family plan, i.e. a traditional life insurance plan or ULIP.
Traditional plans also give terminal, interim and reversion bonuses (varies from business to business and item requirements) that can assist you accumulate a smooth amount for the future of your child. The long-term capital gains tax on equity investments produced through mutual funds or directly has made ULIPs appealing for long-term wealth generation. ULIPs also enable you to select and move between investment funds according to your risk profile and market circumstances.

What are the Salient Features of a Child Plan?

Flexibility to choose policy terms and payment periods in accordance with your objectives.
Facility to avail regular payments at predefined intervals to satisfy the multiple milestones in the child's lives such as higher education charges, hostel charges, coaching class charges, etc.
Most plans offer an in-built premium waiver (WOP) option whereby, in the event of the death of the life insured parent during the policy tenure, all future premiums are waived (the premiums are paid by the insurance company) and the policy continues as per the original terms and conditions. All advantages are charged as and when due. In brief, WOP guarantees that the child's future is not compromised owing to a shortage of resources, even in the absence of the breadwinner parent.
Payment of a lump sum or the amount guaranteed during the policy tenure in the event of the death of the life insured parent.
The premium paid for a family plan is eligible for tax deduction under Section 80C, whereas any revenue from the plan is tax-free under Section 10(10D) (as per present tax regulations).

How a Child plan Scores Over a Mutual Fund?

You will wonder why not just invest in a mutual fund for the future of the child. After all, this is not what most economic specialists suggest. We have all read about how and nothing else, mutual funds are vehicles for development and investment and insurance policies for life insurance coverage.

However, a child plan is superior to a mutual fund in the following manner:
1. Waiver of premium: The game changer in a family plan is the waiver of the premium function that does not occur in mutual funds. Future premiums are waived and the policy remains uninterrupted. The advantages are provided to the kid during maturity or during critical milestones as chosen during the purchase of the policy. Thus, with a child plan, the parent can secure the future of his or her child regardless of whether or not he / she is present.

2. Death Benefit: In the event of the life insured parent's death, the assured sum is immediately paid off and the policy continues. The family can use this lump sum quantity to satisfy their emergency costs or any other needs while the policy remains unaffected. In the case of a mutual fund, the parent may not continue the SIPs on the death of the breadwinning and the future of the child may be jeopardized. The accumulated corpus may be withdrawn by the family and used for any purpose or short-term goals and not kept exclusively for the future of the child.

3. Market volatility: It is a reality that many mutual fund investors are not comfortable with market ups and downs, particularly first timers. Many investors become unnerved when the markets become unstable and can redeem their investments or prevent further investments / SIPs in mutual funds thereby denting the likelihood of generating an appealing corpus for the future of their child. Child plans that are insurance plans have lock-in periods that minimize the risk of premature withdrawals and help in disciplined and regular savings for the future of the child.

To know more about Mutual Fund, you can visit our website http://www.jayantharde.com or contact our representative at +91 712 2282029 or meet us at 51, Gurukripa, Old Sneha Nagar, Wardha Road, Nagpur – 440015.

Source: https://hardejayant.blogspot.com/2019/08/someone-rightly-said-raising-kid-is-not.html