Tips for Selecting the Best Child Education Plan

The best gift parent(s) can give their children is quality education. Hence, regardless of their earning scale, everyone saves for their child’s education expenses. While some parents create FDs for their child’s education, others may open a separate savings account for parking education funds. These methods may sometimes serve the purpose, but the rising inflation and escalating education costs will affect the maturity amount in most cases. 

If you want your savings to grow over time and create a financial security net for your child’s education needs, investing in the best Child Education Plan can be your greatest decision. This financial tool combines savings, insurance, and investment to ensure your child’s education plans remain unaffected, even when things don’t go the way you planned.     

How to Choose the Best Child Education Plan?

The available range of child education plans can easily overwhelm any parent. Even if days of research cannot help you decide ‘which is the best Child Education Plan In India,’ then start using the following tips to find the best plan:

• Choose Plans that Align with Your Child’s Education Goals 

Before looking for any Child Education Plan, estimate your child’s future education costs based on their age, inflation trends, and potential career interests. Decide whether you want to use this fund for undergraduate, postgraduate, or international study.

Determining a clear and realistic goal will help you select the right plan that can accumulate the necessary funds without putting financial pressure on other aspects of your life. Investing early during your child’s young years is recommended because it will ensure the policy matures at the right time. 

• Evaluate the Plan’s Flexibility of Payout Structure

Not all education plans provide similar payout structures. Some allow you to get periodic payments, while others may give a lump sum at the end of the policy. Lump sum payouts are great for covering higher education costs, while periodic payments can provide financial relief during schooling and college. So, assess your expected needs and pick a plan whose payout structure matches your financial requirements.

• Pick Plans Based on Your Risk Appetite

There are various Child Education Plans, each with distinct features and risk profiles. If you are risk-tolerant, then Unit-Linked Insurance Plans will be better for your children because they allow a part of the premium to be invested in debt funds, equity, and other financial securities.

While investments in equity are risky, they also have a potential for higher returns. Conversely, if you’re risk-averse, endowment plans will be a better choice. Market uncertainties do not affect these plans, providing you greater financial stability. We recommend assessing each plan based on your risk profile and not just the promised benefits of a child education plan.

• Look for Premium Waiver Benefits

If you’ve done enough research on ‘what is Child Education Plan’ and related aspects, you would know that a premium waiver is a must-have feature on child education plans. Plans with a built-in premium waiver or as an additional benefit lets the insurer pay the remaining premiums if the parent(s) pass away.

In case of the unfortunate demise of the policyholder happens without them paying the full premium, their children will not have to pay the pending premiums because of the premium waiver benefit. The insurer will pay it themselves till maturity. Children can then claim full maturity benefits to fund their education. You can also add additional benefits/riders to a particular plan to make the policy more effective.

Benefits of Child Plans

Not all child education plans are designed the same, but they all provide numerous benefits to the insured. Regardless of the child education plan you choose, you can rest assured of receiving the following benefits of a Child Education Plan.

• Financial Security for Child’s Future

Investing in a child education plan ensures that your child will remain financially secure, even if something happens to you. The amount received on policy maturity can be used to fund higher education, start an entrepreneurial venture, or anything that supports their dream career. Hence, always invest in the best Child Plans such as Shriram Life Early Cash Plan to secure your child’s future.  

• Tax Savings

You can claim deductions of the amount paid towards the education plan’s premium, lowering your tax liability. However, you can only claim up to a maximum of ₹1.50 lakh/per annum u/s 80C. 

The maturity proceeds are also tax-free u/s 10(10D). This exemption is available if the premium payment didn’t exceed 10% of the sum assured during the policy term and the premium didn’t exceed ₹2.50 lakh mark in any year. In the unfortunate event of the policyholder’s death, the death benefits received by the child (nominee) will also remain tax-free u/s 80(10D).  

• Partial Withdrawals

Some plans allow policyholders to make partial withdrawals against the funds they have accumulated over the years. It can provide instant financial relief during emergencies. 

• Peace of Mind and a Sense of Control

Some individuals rely on their savings plans to fund their child’s education. While these plans provide great benefits, emergency expenses like hefty medical bills, marriage expenses, major property renovation, etc., can deplete the accumulated funds.

Saving for your child’s education by investing in the best child education plan will give you peace of mind and an assurance that your child’s education fund remains untouched and is only used for the designated purpose.

• Secure Education Loan Against Policy

If your child’s education plan changes over time and require a higher amount before maturity, you can secure an education loan by using the policy as collateral. For example, the Shriram Life New Shri Vidya plan can be used to get a loan of up to 80% of the surrender value.    

How Does a Child Plan Work?

‘Which is the best child education plan in India’ is probably the most pressing question many parents ask themselves. While not all plans provide the same benefits, features, etc., they work similarly. The plan comes into effect when you choose the right plan for your child’s education, fill out the required application form, upload the necessary documents, and make the first payment.  

You continue making timely premiums, and the insurer invests those in equity, debt instruments, or other financial securities based on the policy type and terms. The policy matures once your child reaches a specified age or the policy term is over. In either case, you receive the maturity proceeds that can be used for your child’s education. If the policyholder dies during the policy tenure, the child (nominee) receives full death benefits.

Secure Your Child’s Future with Shriram Life Insurance

The future of children depends significantly on the level and quality of education they receive. So, parents must make financial arrangements for their child’s educational needs. Whether you’ve recently become a parent or your child has already started their schooling journey, it’s recommended to start saving early by investing in the best Child Education Plan. This strategic investment will ensure that your children complete their education, even if things don’t go as planned.