Using Life Insurance as a Tool for Child Education Planning
Once you become a parent, you have a lot of responsibilities that you need to cater to. One of them is taking care of your child’s educational needs. As we all know, education is very expensive these days. Whether you want your child to study at an international school in India or want to pursue higher studies at an Ivy League institution abroad, you will need a lot of money. Life insurance helps you to pay for your child’s education. Read on to know how that happens.
What is life insurance?
Before we get into the details of how it can help, let us clearly understand the life insurance meaning. Life insurance is a product that covers your life while you also build up a financial corpus for your family. It is a platform where you can combine the components of insurance and investment. Hence, while your life stays covered, you build up a financial cushion for your child which helps him to achieve his goals later on in life.
How can life insurance help?
Life insurance can help your child in various ways, the most important ones being:
- Death benefit
A life insurance plan works on a simple principle – if the policyholder dies before the policy matures, the beneficiary receives a sum assured, which is also known as the death benefit. If you die within the policy period, your family will receive this sum of money. The money can then be used to pay for your child’s education and make sure there are no compromises made in that department. You need to choose the coverage amount very carefully, keeping the age of your child and his academic aspirations in mind.
- Maturity benefit
Most life insurance plans have a maturity benefit component. If you outlive the policy period, the insurer pays you the maturity benefit, which is a large amount of money. Many people buy insurance plans to save up and use the maturity benefit to pay for their child’s important financial milestones, such as college admission fees. You can also plan and make a good investment and help your child fulfil his dreams with the help of the life insurance maturity benefit amount.
As you can see, you can effectively use life insurance as a tool for your child’s education planning. Use it well and meet your financial targets easily.
Best life insurance plans for your child’s education
While life insurance is very helpful in helping fund your child’s education, you need to understand how each type of life insurance plan works to know which one would be of best use to you. Some of the good options for securing your child’s future are:
- Child plan
A child insurance plan is one of the best ways to save up for your child’s education. A child insurance plan helps you build up a corpus while keeping your life covered. It is a great way to protect your child against your own untimely death and the financial challenges that can crop up thereafter.
- Endowment plan
An endowment plan is a classic life insurance plan where you pay a regular premium, and the policy keeps your life covered. A part of the premium you pay is also invested and earns a regular interest. The corpus, therefore, keeps growing, and when the plan matures, you get a lump sum amount of money to pay for your child’s education. If, however, you die within the policy period, your nominee gets a sum assured, which can also be used for your child’s future.
- ULIP
ULIPs come in very handy here as you can easily combine investment with insurance. While your life remains covered, the money you pay is invested in the stock market and grows handsomely. You can also choose the type of investment you want to go for based on how much risk you can take. A ULIP can become one of the smartest tools in your financial portfolio.
All the life insurance options listed above work well to protect your child’s financial future, so compare and find the best plan right away.
The final word
As you can clearly see from the points mentioned above, life insurance is essential for every parent. Whether you choose a child plan or a ULIP, ensure you have a proper plan and investment idea to help your child have a secured future in your presence or even after you are gone. So, make a list of your requirements, check your budget, find the ideal life insurance plan and get with it without any further delay to keep a safe financial cushion around your beloved child at all times.
