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A parent’s biggest worry is not to have enough financial means to pay for their child’s dreams. That is why it is important to plan for your child’s secure future to pursue their dreams with ease. To be able to do that, you need a corpus to pay for their education or marriage. However, what happens to their future if something happens to you? Who will take care of their financial needs? This is where the child money back plan comes in. This money back plan ensures a significant corpus of funds created for the children, whether the parents are alive or not.
A child money back plan is a traditional money back policy that combines the benefit of an investment and insurance package to secure a child’s future. This plan also offers an incentive component that can be used to meet the needs of growing children.
Let us discuss key features of a child money back plan.
- Survival Benefit
When you invest in this policy, you will receive money after every specified number of years. You start receiving payments within a few years of starting the investment and continue to receive the benefit until it reaches maturity. These payments can be used to meet your child’s specific needs at that time, such as paying for their admission fee. At the end of the policy, the policyholder will receive the remaining amount and a guaranteed bonus that helps increase their savings.
- Death Benefit
In case of an unfortunate event, such as the policyholder’s demise, your child will still receive the death benefit. This benefit includes the sum assured as well as all the bonuses accumulated by your policy. However, this does not include the survival, which is only paid to the policyholder if they survive the policy period. The child can use this money to pay for their education, marriage, or any other need applicable to their life stage at that time.
- Maturity Benefit
The policyholder receives the maturity benefit at the end of the policy, consisting of the sum assured, a full amount you selected when buying the policy. You will also receive a company performance-linked bonus that has accumulated over the years.
Benefits of child money back policy
- Tax benefits
According to section 80C of the income tax act, you can claim deductions up to Rs. 1.5L on the premium paid towards your child money back plan. Additionally, even the maturity benefit remains tax exempted as per section 10(10D) of the income tax act.
– Delay survival benefits
You can earn a bonus on your survival benefit by delaying receiving it. This delay is permissible as long as you receive the bonus within the policy duration. If you delay receiving the benefit, the payable benefit will be increased by a factor that was agreed at the time of buying the policy. You can choose this option if you are planning a bigger expense towards the end of the policy, such as funding your child’s education. A lump sum amount at that time compounded by a bonus can prove handy.
– You can take a policy loan
If you need funds, it is also possible to take out a loan against your child money back plan. The value of your loan will be based on the surrender value of your policy, a portion of which will be available for you as a loan.
– Premium Waiver Benefit Rider
If the policyholder takes this rider along with the child money back plan, then all the future premiums will be waived off if he/she dies within the policy term. However, the policyholder’s age has to be between the age of 18 and 55 to be eligible for this rider.
– Surrender benefit
You can surrender the policy and receive a cash benefit, provided you have paid three full years’ premium.
If your child money back policy has lapsed due to some reason, you can receive it for up to 2 years from the date of the first unpaid premium. However, you would need to clear all the arrear payments to reinstate the policy.
As is with any insurance plus investment plan, a child money back plan is also a helpful instrument to secure your child’s future till they turn 25 years. Just like ULIP, you can get a life insurance cover and invest the remaining portion of your premium on other asset classes.
But before you invest in these policies, you need first to understand what is ULIP or a money back plan to make an informed decision.