A child plan can allow parents to build funds for their child’s future requirements, such as education expenses. Therefore, such plans can help parents secure their children’s future. However, there are a few things that people should consider before investing in a child plan.
In this article, we will discuss a few things that parents should keep in mind before investing in a child plan.
One of the most important responsibilities of every parent is securing their children’s future. Thus, financial planning is essential as it can help parents build funds for their kid’s future requirements. One of the best options that can enable people to meet this goal is a child savings plan.
A child savings plan can allow parents to secure their child’s future. While it allows them to build funds for the future, it can also provide them with life cover. Therefore, such plans can help accumulate funds and offer life cover in case the parents pass away untimely.
But before investing in a child plan, parents must keep in mind a few important things-
- Start Investing Early
The more time parents stay invested, the more their corpus can grow. By starting to invest early, parents can have a long investment tenure, and it can help them meet their goals easily.
- Consider the Changing Needs and Rising Costs
One of the most important things to determine before investing in a child plan is the amount of funds that parents can accumulate. While calculating this sum, parents need to consider the amount is sufficient to meet large expenses. They should also keep in mind the changing needs of their children.
- Claim Settlement Ratio
The claim settlement ratio refers to the number of claims settled by the insurance company against the number of claims received. Thus, the higher the claim settlement ratio, the more is the likelihood of the claims getting approved. Hence, parents must consider selecting an insurer that has a high claim settlement ratio.
- Look for Insurers with Waiver of Premium Option
If the parents pass away during the tenure of the policy, then this option waives the remaining premiums. All the remaining premiums can be paid by the insurer. Therefore, it is crucial for parents to choose a plan that offers waiver of premiums.
- Understand the Risk-Appetite
Before investing in a child plan, parents must understand their risk appetite. In case parents have a high-risk appetite, they can consider unit-linked insurance plans (ULIPs). Such plans provide exposure to equity investments. Hence, it can help parents earn better returns. Furthermore, parents with a low-risk appetite can look for plans that are less risky, such as endowment plans. In case of endowment plans, the returns are stable and the lump sum payout is guaranteed.
- Understand the Policy Documents
In order to avoid problems that might arise in the future, people must understand the policy documents entirely. By understanding the policy documents, parents will know things that are important, such as the claim settlement process.
