What is a Children’s Endowment Policy?
A children’s endowment policy is a life insurance plan that provides financial protection for your child’s future. It offers life coverage, meaning that if something happens to you, your child is financially protected. At the same time, it helps you save money for future financial matters like education or weddings.
In simple terms, this policy helps you save money over time, and when the policy matures, you get the savings plus a one-time payout. It could give a feeling of calm, knowing that your child will have money when they need it.
Benefits of Buying a Children’s Endowment Policy
There are several reasons why you might want to buy a children’s endowment policy:
Financial Protection for Your Child:
The policy offers life coverage. If you pass away, your child will receive the policy benefits.
Saves for the Future:
The policy allows you to save money over time. When the policy matures, you can use the funds for your child’s education, marriage, or even a start-up.
Tax Benefits:
You may reduce your taxes on the premiums you pay under Section 80C of the Income Tax Act (under old tax regime). The lump sum amount you get when the policy matures might also be tax-free under Section 10(10D), subject to conditions.[1]
Features of Child Endowment Policy
A children’s endowment policy offers several features that make it a good choice for planning your child's future:
Life Coverage:
The policy provides life insurance cover. If you pass away, your child will receive the policy benefits.
Maturity Benefits:
After the policy time is completed, parents can receive a lump sum amount or opt for other payment options, like annually, semiannually, quarterly, or on a monthly basis. This money can help pay for your child’s education, marriage, etc.
Bonus Facility:
Some policies offer bonuses that can increase the policy’s value over time.
Tax Benefits:
Premiums paid are eligible for tax deductions under Section 80C, and the maturity amount may be tax-free under Section 10(10D) subject to conditiond.[1]
Premium Waiver:
Some policies offer a premium waiver if the policyholder dies, meaning no one has to pay future premiums. This ensures the child's policy remains active and continues to accumulate value, even without further premium contributions.
When Is the Right Time to Invest in a Child Endowment Plan?
The right time to invest in a children’s endowment policy is when your child is young. Starting early can give you the advantage of lower premiums and more time to save. The earlier you start, the more money your policy may grow.
Investing early also means that you’ll have ample time to save for major life events, such as education ,marriage etc, which may come up when your child is older. Starting early might also allow you to spread the premiums over a longer period, reducing the money stress during later years.
What Mistakes Should You Avoid When Choosing a Child Endowment Plan?
When choosing a children’s endowment policy, avoid these common mistakes:
Not Aligning with Financial Goals:
Make sure the policy fits your long-term goals. If you want to save for your child’s education, choose a plan that provides enough coverage when they turn 18.Not Checking Premiums:
Ensure that the premiums are affordable. Don’t over-commit financially, as you’ll need to pay the premiums from time to time or as one time lump sum payment.
Not Understanding the Policy Terms:
Read the terms and conditions of the policy carefully. Understand the coverage, benefits etc. .Choosing the Wrong Insurer:
Research different insurance providers to find the one that offers the best child policy, with a high CSR, strong reviews and solid financial backing.
By avoiding these mistakes, you can make sure that you’re securing the best possible future for your child.
Conclusion
A children’s endowment policy can be a good way to secure your child’s financial future. It offers both life insurance and a way to save for your child’s major life events, such as education and marriage. By understanding the benefits and features, you can make an informed decision and ensure that your child is financially protected.
FAQs
What happens if I miss a premium payment?
Missing a premium payment could cause your policy to expire. However, many policies provide a grace period, allowing you to pay the missed premium without losing coverage within the grace period .[2]
What should I consider when purchasing a child endowment policy?
Consider the premium, the sum assured, the policy duration, and the benefits that suit your child’s future needs. Make sure the policy is affordable and aligns with your goals.
Can I switch or change my child’s endowment policy during the term?
Some policies may allow you to make changes to coverage or premiums. Always check the policy details or consult your insurer.
Are there any options for partial withdrawals in a child endowment policy?
Partial withdrawals may be allowed in certain child endowment policies, but this usually comes with specific conditions. As per regulatory guidelines, such withdrawals are only permitted after the child turns 18. It's essential to check the policy details to understand the available withdrawal options and the eligibility requirements.
Can I assign a beneficiary to my child’s endowment policy?
Yes, you can assign a beneficiary to the policy, who will receive the benefits in case of death of the life assured.
Which is the best children’s endowment policy in India?
The best policy depends on your financial goals. Bajaj Allianz Life Insurance offers a range of child endowment plans with flexible features.
Can I claim tax benefits for a children’s endowment policy?
Yes, premiums paid for children’s endowment policies qualify for tax deductions under Section 80C of the Income Tax Act.[1]
What is the maturity age for children in these policies?
The maturity age is usually set by the insurer. It’s typically 18 or 25 years as they are aligned to educational goals when your child can receive the lump sum payout.
How to buy a children’s endowment policy online?
You can purchase a children’s endowment policy online through company’s official website by selecting the plan, filling out the necessary details, and making the payment.
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