Planning to Buy a Child Plan? Here is The List of Things to Look at Before Buying

Being a parent, you have to take on additional responsibilities when you have a child, both emotionally and financially. The joy of having a child is immeasurable, but it also means a spike in your finances. While you may have a lot of savings today, but would that be sufficient for your child's future? Parents, while handling the child's present needs, tend to ignore financial planning for their child's future. If you're a concerned parent, you need to start investing in a child insurance plan. When it comes to buying an insurance/ investment plan for a child , most parents are clueless about where to begin, how much to save, and which plan to buy. It is best to start saving early for your child's financial needs as it will help you build a considerable fund that will suffice his future milestones. Before you plan to invest in a child plan, here is a list of things you should look for:

• Invest early: You need to begin investments soon. The reason being you have to pay a lower premium. Starting early will give you a long investment horizon, which will help you to accumulate wealth. A delay in a child insurance policy will only increase the premium rate, and you wouldn't be able to reach the expected corpus.
• High-risk appetite: Along with a lower premium rate, you can opt for risky financial products when you invest early. Child insurance plans like Unit Linked insurance plans (ULIPs) gives you exposure to equity investments, which can help you to earn better returns if you stay invested for ten years and above. With ULIPs, you can choose a mix of high-risk investments like equity and safe funds like debt instruments.
• Low-risk appetite: If you have a low-risk appetite, you can select traditional insurance plans like endowment policy, wherein the lumpsum payout is guaranteed. The investments mostly focus on low-risk products. The returns are stable. Endowment policies guarantee not only safe returns but also ensures adequate cover for your child.
• Policy goals: Whether you choose to buy a ULIP or an endowment plan, both policies offer a lump sum amount in case of the policyholder's death. To help the child meet everyday expenses, ULIP provides a regular income in case of the policyholder's unfortunate demise. In such a scenario, the insurance company waives future premiums. On the other hand, the endowment policy is also flexible as it guarantees to pay the sum assured in a lump sum when the policy matures or policyholder's death.
• Tax benefit: When you pay a premium for a child plan, you can claim a tax rebate of up to Rs.1.5 lakh under Section 80C of the IT Act. Additionally, a claim on tax deductions is also possible on death or maturity claim profits under Section 10 (10D)

These are some of the things you should know before choosing to invest in a child insurance plan. Whether you select a ULIP or an endowment plan, your decision solely depends on your risk appetite. It is always advisable that you should start saving early to ensure your child’s bright future.

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.