Mumbai based Ashok Dave (35) and his wife Sayali (33) are a working couple. They are savings for various life goals including higher education for their 3 year old daughter.
However, they are in a fix. Higher education is expensive and the costs are rising at 10 to 12 per cent a year. Foreign education can cost much more. For example, a two-year MBA program in India costs roughly Rs 10 lakh a year right now. In 17 years, the cost of this course would be Rs. 23 lakhs (at a 5% inflation). While they are mindful about this fact, and are investing and saving regularly, they know that their plan will not hold well if either of the parent is no more.
This is where a child education plan is useful. Since it is an insurance plus investment plan it helps you secure your child’s education, even if you are no longer there. It enables parents to save and invest regularly and build a corpus that can support their child during his/ her higher education.
The good part about a child insurance plan, compared to a term insurance plan, is that it offers a lump-sum payment on the death of the policyholder, but the policy does not end. Like other money-back insurance plans, Child plans are of two types:
• A Non - Participating Unit Linked Insurance Plan (those that invest in the equity/ debt market)
• A Savings - Non Linked Participating Insurance Plan (those that do not invest in the market)
Let us learn how a Savings - Non Linked Participating Insurance Plan works
Suppose Ashok decides to save Rs 100,000 a year for his daughter’s post-graduation, which is 17 years away. He can choose a policy term that coincides with this milestone. Based on this lifestyle (smoking habits, health, medical history etc), age and other factors, he can opt for a cover amount of say Rs. 17 Lakhs.
Once the policy commences, he pays regular premiums. If he survives the policy term, based on the options he has chosen, he receives guaranteed pay-outs, every year, after the end of the paying term. In addition he receives the accrued bonus. All of these pay-outs can be used for his daughter’s academic milestones.
However, in case Ashok does not survive the policy term, his daughter (nominee) receives a lump sum amount. In addition, the policy continues and all the future premiums are waived by the company. The child will still receive the yearly pay-outs after the scheduled premium payment term is over. In addition, she will also receive the accrued bonus. Hence, even in Ashok’s absence, his daughter's education is secured! To calculate your child’s education requirements, you can visit our calculator here. To read more about our child savings plans, and how they you can customize basis your plans, visit our product page.