Every parent wants to provide their children with the best things in life, securing thechild’s future& converting their dreams into reality.There are multiple options available, with the parents wanting a secure financial future for their children. However, the two main options available are: a Child education plan & a child insurance plan.
Though both of them offer a secure financial future, they differ on certain parameters as well. Where a child’s education plan helps save for a child’s future education goals, allowing them to meet multiple educational milestones. On the other hand &, a child insurance plan helps provide safety & financial security to meet unforeseen circumstances. While understanding the key differences between child insurance & education plans, it is also advised to explore the different financial instruments available, such as a child saving plan.
Things to be consideredwhile selecting a Child’s Education or Insurance Plan
Provided are the factors to be considered while selecting a Child’s Education or Insurance Plan:
Assess the Financial Stability
Assess the present situation, i.e. there must be a regular source of income to bear the premium cost throughout the policy tenure. You must be financially stable, which will help in maintaining a lifestyle that best suits your child & ensures that he will receive the desired benefits.
Evaluate Coverage & Benefits
Check for the coverage of the plan, i.e. in case of an education plan, check whether the expenses like books, tuition expenses, uniforms, & extracurricular activities are included or not. On the contrary, in the case of an insurance plan, the medical costs, disability, hospitalisation, or any other utility costs are included or not.
Consider Plan Duration & Benefits
Consider whether the policy tenure matches the milestones of your child, along with the associated benefits of the plan. Check for the flexibility, coverage adjustment, modification of premium, beneficiary updation, etc.
Understand the Claim process.
It is important to understand the claim process, the documentation required, the steps involved in filing a claim, & the response time. Understanding all these factors will help you save time & reduce stress in the event of unforeseen circumstances.
Review Policy Terms & Conditions Carefully
Have a look at the terms & conditions of the plan to check for its inclusion, exclusion, coverage, & waiting period. This is done to understand the benefits of the plan, & in case of any queries, seek professional advice.
Key differences between the Child Education Plan& the Child Insurance Plan
Provided below are the key differences between the child education plan & the child insurance plan:
Point of difference
Child Education Plan
Child Insurance Plan
Investment Component
It includes an investment factor, which allows the policyholder to choose from the different investment options available. This includes higher returns & simultaneously higher risks.
The main objective here is to provide life coverage, though it may include an investment component. Here, returns are comparatively lower.
Scope
It covers education-related costs, such as books, tuition, coaching, etc.
It can be used for a wide scope, which includes higher studies, business, marriage, etc.
Purpose
To bear the children’s education expenses
To offer dual benefit, i.e. insurance & investment.
Risk profile
It best suits individuals looking for higher returns along with moderate to high risk.
It best suits individuals looking for pure protection coverage with low risk.
Time Horizon
Short-term, as it focuses on education-related milestones
Long-term, spread over several years.
Maturity Benefits
Periodic payouts or a lump-sum amount on achieving different education-related milestones
Lump sum benefits at the time of maturity.
Tax Benefits
It may include taxation benefits covered under Section 80C of the Income Tax Act, 1961.
It includes taxation benefits u/s 80C on the premium amount paid, along with Section 10 (10D) on the maturity benefits received.
Flexibility
Less flexibility in terms of fund management & investment options
More flexibility in terms of fund management & investment options
Cost
Premiums may be higher
Premiums may be lower
Payout Structure
Periodic, i.e. quarterly or annually
Lump sum payout
Flexibility
It is limited to education-related expenses only
It offers a wide coverage
Coverage
It includes expenses incurred on education only.
It offers life coverage & provides financial security in case of the sudden demise of parents.
Additional Benefits
It offers some additional benefits, such as a loan facility or partial withdrawal.
It offers additional benefits, such as additional riders, accidental riders, critical illness riders, etc.
Reasons to Buy a Child Education Plan
Provided are the reasons to buy a child’s education plan:
It helps in building a committed fund for this purpose only.
It builds finances for academic & tuition costs, etc.
It makes sure that the tenure matches the child’s milestone.
It helps maintain discipline & savings.
It includes added features such as a loan facility or partial withdrawals.
Allows tax benefits u/s 80C & 10(10d) of the IT Act, 1961.
Helps reduce financial burden.
Ensures there is continuity in the child’s education.
Reasons to Buy a Child Insurance Plan
Provided are the reasons to buy a child insurance plan:
It helps you with life coverage.
In case of a parent’s death, the child receives a lump sum payment.
It allows waiver of the premium amount, ensuring uninterrupted continuation of the plan.
It offers the dual benefit of insurance & investment to achieve long-term financial growth.
Ensures that the plan meets all future goals.
In the absence of a parent, it will ensure the security of the child.
It allows flexibility in adding the critical riders to the plan.
It offers mental peace.
Conclusion
To conclude, both child education & insurance plans offer benefits in their respective area. On the contrary, both are also different in certain factors, like benefits offered, coverage, costs, etc. There is no solution to one size that will fit all, hence you should consider buying a combination of both. It means starting with buying a child insurance plan, which will provide overall protection. & later on, supplement it with the education plan for the child’s growing age. This way, not only is education secure, but the child’s complete future is also secured.
