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Planning for your child

The dynamics of planning for your child's future have changed radically over the years. The conventional method of providing for the child was to just set aside some amount of money in a savings bank account. These funds would then be utilized for the child's life stages. Another option would also be to invest in fixed deposits with the intention of utilizing the maturity amount. However, it would be safe to say that such an approach is not only outdated, but also inadequate in the present scenario. Lifestyle and attitudinal changes have deemed it necessary for some sort of child insurance plan.

What is child future plan policy?

Life insurance plays an important role in an individual's financial planning exercise. The concept of child insurance stretches this basic idea further. As a parent, you insure your child's life. This does not mean that you are anticipating an unforeseen fatal event but, merely securing the different stages in your child's life. You are securing your child's safety and, ensuring that there is liquid cash always available for your child's unexpected expenses. Various types of child insurance products are available in the market today. Child plans come in two broad variants - traditional child plans and unit linked insurance plans (ULIPs). The primary difference between the two lies in the way they invest their premium. Traditional plans invest a major portion of their money in debt instruments like corporate bonds and government securities (as specified by the regulator). Conversely, ULIPs can invest across equity and debt markets in varying proportions. They can either opt for a regular 'Traditional endowment plan' which carries relatively lower risk since it is invested mainly in corporate bonds and government securities. The bonuses are stable and give the parent considerable comfort knowing roughly how much he or she can expect.

Child Health Insurance plans:

In 1996, ICCI Prudential introduced the concept of child health insurance plans. ICCI based the scheme on a UPIL insurance framework. The plan stated that parents could insure the health i.e. physical, social and mental health. The insurance plan covered: All medical related illnesses requiring hospitalization and prolonged physical therapy including medication

» All developmental disorders certified by the Medical Board
» All mental and neurological diseases certified by the Medical Board
» All accidental and emotional injuries, trauma and shock

The plan further stated that the insurance scheme would only come into effect after 45% of the entire amount was paid. ICCI Prudential makes child health insurance plan applications available online. It makes minimal difference to your application if you or your spouse happens to have different health insurance. The application seeks to go into medical detail, ascertaining that the bank or agency does seek to provide life health insurance to a chronically ill child.

Child whole life Insurance plans:

This is also known as a low risk insurance plan. Child whole life insurance plans are usually sought by parents with steady income. This policy ensures that a child is always guaranteed of basic and comfort expenses irrespective of parental income and situation. Premiums are usually high. The primary advantage of the child whole life insurance plan is its multi usage. The policy can be used for a variety of purposes, as long as the policy holder i.e. the child sanctions it. Policy loans can be taken out against it. The policy can also be used to finance child education, travel and business opportunities.

Life insurance has much to offer to parents looking to accumulate wealth for their child's future. There are several plans offering enough flexibility to help parents with the same. But, in the end the parents have to decide and make an informed decision.

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