To raise your child properly, your duties aren’t limited to food, clothing and shelter. You also require shaping their knowledge and character, educate and teach them, and prepare them to face the real world. Along these lines, you need to provide your child with the best possible education and investing in the best child education plan is a step in the right direction.
Child education plans are a form of life insurance plans that are designed to create a secured financial corpus for your child future. However, in spite of the many benefits offered by such plans, there are a lot of myths attached to it. Parents usually fail to understand the finer details of child plans and develop preconceived notions, which prevent them from buying one. In the following sections, we will debunk some of the most common child plan myths for you.
Myth 1: Your Child’s Life Is Covered Under the Child Education Plan
The most common myth surrounding child education plans is that the life assured is the child. However, child plans insure the life of the income-earning parent. The child merely acts as the beneficiary in case of an unforeseen event such as the untimely demise of the parent. Opting for a child plan ensures that your child has the necessary financial support. Thus, assuring that you, as a parent, have one thing less to worry about in your absence.
Myth 2: In case of Your Sudden Demise, Your Child Will Have to Pay the Premium
Child plans from reputable insurers like Future Generali come bundled along with a ‘Waiver of Premium’ benefit. Meaning, your child won’t be burdened with the responsibility of paying the future premium in your absence. The policy continues to stay active, even in your absence, as the insurance company takes it upon itself to pay all future premiums.
Thus, in case of your sudden demise, the child education plan does not get discontinued. Instead, in such an event, the insurance company pays a lump sum amount to your nominee, which can be utilized for meeting the future needs of your child.
Myth 3: You Can Only Avail the Payout at The End
You do not have to wait till the maturity of the child education plan to avail the payout. In fact, the best child education plan allows withdrawing a certain percentage of the fund after completion of the five-year lock-in period. Moreover, you can make the withdrawals at fixed intervals, to coincide with the major events in your child’s life.
Myth 4: It Is Only Suitable for Meeting Your Child’s Education Costs
In a child education plan, there are no restrictions on the usage of the plan benefits. When the payout is made, it is not necessary to use it only for the child’s future education. You can use it as you please.
Suppose, if your child chooses not to pursue higher education or you would like to use the payout for fulfilling other commitments, you can still do so. However, making funds available at the due dates and securing your child’s future remains the primary aim of the child education plan.
Myth 5: Child Education Plans Provide Only Insurance Coverage and Nothing More
Apart from offering you an insurance cover, the best child education plan also acts as an investment tool. This becomes possible by making an early investment in a ULIP-based child plan. In such plans, the premiums paid by you are invested in the equity market (as per your preference).
Therefore, your investments can grow according to the growth in the equity markets. Also, since equity market growths are inflation-adjusted, your child education plan provides a sufficient corpus for meeting rising costs in the future. This, in turn, it effectively helps meeting the increasing educational and other needs of your child.
Myth 6: The Terms and Conditions of The Child Education Plans Are Difficult to Understand
Child education plans are simple to understand. You just need to understand the benefits promised under the plan, the premium that you must pay and the tenure of the plan. The rest is easy. The child plan continues for the chosen policy tenure and promises maturity benefit even after the untimely demise of the parent.
The Bottom Line
Hope that we are able to clear the myths surrounding child education plans. If you too have believed in any of these myths, it’s time to see the reality.
Remember that the key is to invest in a child plan as early as possible, no matter how much you start with. So, think of buying a child education plan the day when your bundle of joy is born. Investing early will only benefit you, thanks to the ‘Power of Compounding’. So, understand the benefits of a child education plan and purchase one if you are a parent.