Planning Your Child’s Education? Here’s Why a Child Education Policy in India Helps

Many parents invest in a child's education policy or a child's education insurance policy in India to ensure their child’s needs are met. While some parents use fixed deposits (FDs) or separate savings accounts, these traditional means often fall short of beating inflation and increasing education costs. Investment in a child's education plan will see your savings appreciate with time, thereby providing a strong financial backup. This instrument involves savings and insurance as well as investment to ensure your child's education needs will be met in the occurrence of untoward events.

Features of a Child Education Policy

Child education policy generally contains the following features:

• Life Cover: 

A child education policy protects your child's education in the unfortunate circumstance of the demise of the policyholder.

• Savings Component: 

An amount is allocated from the premium for building up a certain fund for payment of future education costs.

• Flexible Payouts: 

Options to receive lump-sum payments at key milestones or periodic payouts to meet tuition and living costs. Choice of receiving a lump sum at pre-identified milestones or periodic payment of tuition and living expenses.

• Premium Waiver Benefits:

An insurance policy for child education in India ensures continuation of the plan without further payments in case of the parents’ death

• Loan Facility: 

Some child education policies provide for loans against the value accumulated for an immediate requirement of education.

• Tax Benefits: 

Premiums are deductible under Section 80C, and in most situations, maturity proceeds are exempted under Section 10(10D).

How to Choose the Best Child Education Policy?

Choosing the correct plan can be an overwhelming experience. The following are some tips for considering the best child education insurance policy in India:

1. Choose Plans that Align with Your Child's Education Goals

Assessing any education costs a child may incur in the future, depending on his or her age and inflation trends, and the possible career path expected. Choose whether to pay for undergraduate, postgraduate work, or international studies.

With a defined goal, you will be able to select a child education policy that will avert any shortcomings in funds without exerting too much pressure on your finances. Starting your investment early in a child's education insurance policy in India is a guaranteed way to have the policy mature at the right time.

2. Review the Payout Structure Flexibility of the Plan

When it comes to payout structures offered by a child education policy, they differ. Some provide periodic payments to settle schooling or college fees, whereas others offer a lump sum at major milestones

• The lump sum is used to cover tuition fees and other major expenses. 
• Periodic payouts are used to meet the day-to-day costs along the educational journey. 
• Choose a plan with a payout structure in line with your child's potential educational needs.

3. Pick a Plan According to Your Appetite for Risk

Child education plans come with different kinds of risks:

• Unit-Linked Insurance Plans (ULIPs): Suitable for parents with some degree of risk tolerance, part of the premium is invested in various equity and debt funds with attractive returns.
• Endowment Plans: Suitable for those who do not want to take any kind of risk, as these are subject to a guaranteed rate of return and stability of financial investment irrespective of the market fluctuations.

Whether you opt for a ULIP or an endowment plan, choosing the right insurance policy for child education in India means evaluating each option according to your tolerance for risk, rather than just the benefits it promises.

4. Look out for Premium Waiver Benefit

Premium waiver ensures that in the event of the death of a parent before satisfactory completion of premium payments, the insurer shall pay the balance of premiums on behalf of the owner. Hence, the child will be entitled to receive the full maturity benefits without any financial obligations on his part. Many child education insurance policies in India also allow attaching this rider to enhance protection, so that benefits and flexibility can be maximised.

Benefits of Child Education Plans

Child education plan offers multiple advantages both for parents and children:

1. Financial security for the child's future

Investing in a child's education plan ensures the financial security of your child in the event of the unfortunate occurrence of death. The maturity proceeds can be utilised to fund higher education, start a small business, or even support their career goals. Hence, invest always in reputed Child Plans such as Shriram Life Early Cash Plan to secure the future of the child. 

2. Tax Exemptions

Premiums paid towards a child education policy or child education insurance policy in India qualify for deductions under Section 80C, up to ₹1.5 lakh annually. The maturity proceeds and death benefits are exempt from tax under Section 10(10D), provided that specified conditions, such as the limit on premiums.

3. Partial Withdrawals

Some child education insurance policy plans in India offer policyholders the option to partially withdraw from the accumulated funds. This feature is useful during financial emergencies, such as unexpected medical expenses or education costs.

4. Peace of Mind and Control

With a dedicated child education policy, unlike a regular savings scheme, the money is kept aside to pay for education. Parents need never dip into the savings for other expenses; therefore, they can enjoy peace of mind and control, knowing their child's education is fully secured.

5. Education Loan Against Policy

Many plans allow you to use the policy as collateral to secure an education loan. For example, most plans give provision to pledge your policy to obtain an education loan. For example, Shriram Life New Shri Vidya Plan offers loans up to 80% of the surrender value, so the funds are available for higher education when required. 

How Does a Child Education Plan Work?

A child's education policy commences once a parent selects a plan, submits the required documents, and makes the initial premium payment. Thereafter, the premium is invested by the Insurer depending on the type of plan (ULIP or endowment) and the terms.

After the commencement of the policy, it remains active as long as the premiums are paid:

• Furnishing of maturity proceeds when the child reaches an agreed age.
• In case of death of the policyholder within the term, the child (nominee) gets full death benefits.
• Certain plans provide for partial withdrawals or loans against the fund before maturity.

Ensure a good future for your child with a Shriram Life policy

Shriram Life Insurance offers child education insurance policies in India under their portfolio to cater to varied parental needs:

• Shriram Life Early Cash Plan: Combines cash bonuses with guaranteed benefits to ensure the child’s education gets funded.
• Shriram Life New Shri Vidya Plan: Provides survival benefits and life cover for the uninterrupted funding of educational needs.
• Shriram Life Assured Saving Plan: Provides survival benefits and life cover for the uninterrupted funding of educational needs.

The sooner an individual invests in these plans, the safer the education of the child in the event that things do not go as planned in life.

Plan Ahead, Ensure Success with a Child Education Insurance Policy in India

Child education insurance in India is not just a form of savings; it provides a comprehensive financial solution embracing protection, investment, and peace of mind. In this way, parents ensure the child's education remains uninterrupted, secure, and well-funded.

Start planning early and try to align the plan with your child's aspirations, taking advantage of premium waivers, tax benefits, and flexible payout options. Financial planning will thereby foster confidence and security for the child's future with a good child education policy.

Disclaimer: This information provided is intended for general informational purposes only. For personalised recommendations, please consult a certified insurance professional.