As your child is growing up, you need to start planning for her higher education and other related expenses. You should consider all the costs and decide on a plan that will cover your child’s needs.
Before making the purchase, here is the final checklist you should tick-off:
The key benefit offered by a child plan is the Sum Assured/cover amount or the Maturity Benefit, whichever is applicable that will work to protect your child’s dreams.
Ideally, this amount should be equal to or more than the amount your child will need in the future. Hence, the cover needs to be chosen carefully. In case you are not able to invest in a sufficiently large policy (higher Sum Assured) at the beginning, build it over the years across multiple investments.
In addition to the base cover amount, regular pay-outs or withdrawal facility at important milestone of your child’s life. You should also check if there are assured bonus and loyalty additions.
Currently, the amount paid towards life insurance premium is also tax exempt under the Section 80C, while the income from the plan is tax-free under Section 10 (10D).
Choose the premium payment term based on your goal and your current investable surplus. While there is no restriction on the tenure, plan for it to coincide with the important milestone in your child’s life.
If the plan offers partial withdrawals, learn about the frequency and amount you can withdraw. Generally, there is a 5-year lock-in.
Since a child insurance plan is a wealth creation plan, you should carefully choose where your money is invested so that you can beat inflation and maximize returns. Most child insurance policies offer multiple fund options with varying degrees of risk (equity-debt allocations). Based on your financial risk appetite and investment tenure, choose the fund that meets your requirements.
Since child plans are insurance as well as investment vehicles, your insurance company will incur expenses towards managing the funds. Here are some of the key charges, amounting to approximately 6% of your annual premium.
• Premium Allocation Charges: These are charges towards distribution, underwriting and allocation of units and are deducted from the premium
• Fund Management Charges: These charges are levied towards managing the funds, and are computed as a percentage of the assets’ value
• Policy Administration Charges: These charges are deducted towards administrative expenses, incurred to maintain the policy
• Mortality Charge: This charge is levied for providing risk cover to the life insured during the policy term
• Surrender Charge: This charge is for either partial or full withdrawal from the policy before the Maturity Date
Over the years, these charges have dropped significantly, making Unit-Linked Child Plans highly cost-effective.
You may be entitled to certain applicable tax benefits on your premiums and policy benefits. Please note that all the tax benefits are subject to tax laws prevailing at the time of payment of premium or receipt of benefits by you. Tax benefits are subject to changes in tax laws.
Unit Linked Insurance Products (ULIPs) are different from the traditional insurance products and are subject to the risk factors. The premium paid in the Unit Linked Life Insurance Policies is subject to investment risks associated with capital markets and the NAVs of the units may go up or down based on the performance of fund and factors influencing the capital market and the insured is responsible for his/her decisions. Max Life Insurance is only the name of the insurance company and is only the name of the unit linked life insurance contract and does not in any way indicate the quality of the contract, its future prospects or returns. Please know the associated risks and the applicable charges from your Insurance agent or the Intermediary or policy document of the insurer. The various funds offered under this contract are the names of the funds and do not in any way indicate the quality of these funds, their future prospects or returns.