Every parent dreams of giving their child the best future they deserve. Providing them with education is one of the most essential parts of it. With the rising cost of education each year, it becomes increasingly complex for most parents to manage the high expenses and help their children secure their dream job. Child education plans are beneficial for them. As an independent financial tool to support your child's academic journey, they are invaluable when included in your overall financial planning. This helps establish a strong pillar to manage education-related expenses, even in your absence.

What Is a Child Education Plan?

Child education plans help you fund your child's education expenses. Under this plan, you pay premiums at regular intervals, monthly, quarterly, half-yearly, or annually, throughout the policy term. In return, the insurer provides a maturity benefit. When your child reaches a certain age, you can get the benefit in a lump sum amount. However, the payout structure depends on the plan you choose. It offers dual benefits by helping to secure your child's future and providing them with education while also offering life insurance coverage. Even if something happens to you, the plan continues, ensuring your child receives the benefits.

What Makes the Child Education Plan Unique?

Generally, insurance policies cover all life's important events, including emergencies, health-related issues, or the sudden death of the policyholder. Even if it provides support during tough times, it doesn't directly address a child's future educational needs. It cannot fund specific goals, which include school and college fees, and doesn't give any dedicated benefits to the child.

Recognising limitations to such goal-specific needs, the child education plan is designed solely to secure your child's academic future. It makes sure that even in your absence, there are enough funds to fulfil your child's education-specific needs.

However, child education plans don't replace the protection offered by life insurance; they complement it. Together, both create a complete financial safety net. Life insurance gives your family financial coverage in case of your sudden death, whereas a child education plan makes sure that your child's learning stays on track even in your absence.

How Does a Child Education Plan Act as an Add-On Benefit?

Child education plans ensure a child's future and act as an additional benefit, targeting financial goals that are required, along with insurance protection. Some of the specific reasons are as follows:

• Dedicated savings for education:

These plans are specifically targeted to fund your child's education, covering both schooling and higher education. They are integrated into your general expenses, making it easier to reach your educational goals.

• Security for Your Child's Future:

These plans ensure that your child's education and higher studies continue even in your absence. In case you pass away during the ongoing policy term, future premiums are waived, making sure your child still receives the benefits of the plan for their education.

• Payments When You Need Them

The best thing about a child's education plan is that it gives you the money exactly when you need it. If your child is about to start college or opt for any degree, these payouts are timed to match key education milestones, so you don't have to think about arranging funds.

• Tax Benefits That Help You Save More

Tax benefits are among the biggest perks of child education plans. Premium amounts that you pay can be deducted from your taxable income, up to ₹1.5 lakhs, under Section 80C (only under the old tax regime) of the Income Tax Act. Furthermore, the maturity amount or any death benefit received is exempt from income tax under Section 10(10D), making it an attractive and efficient investment vehicle for the child's future.

• Helps You Build a Habit of Saving

Having a dedicated child education plan encourages you to save regularly. It becomes a disciplined habit, which often feels easier and more manageable than trying to save significant amounts irregularly. Over time, these small contributions grow into a meaningful fund for your child's education.

• Keeps Up with Rising Costs

The cost of education continues to rise, and often at a rate much faster than regular inflation. Child education plans are created to tackle this challenge. Many of them offer returns that can keep pace with or even beat inflation, so your savings remain strong and practical when it matters most.

Types of Child Insurance Plans

• Child Unit Linked Insurance Plans (ULIPs)

These plans operate similarly to regular ULIPs by investing your money in a combination of equity and debt funds. Over the years, your investment grows in line with market performance. At the end of the policy term, you receive a lump sum amount, which is mainly meant to support your child's higher education. Child ULIPs typically release the funds when your child turns 18, unlike standard ULIPs, which have flexible terms ranging from 10 to 25 years. For instance, reputable insurers such as Axis Max Life Insurance offer well-suited ULIPs that prioritise your child's educational goals and financial security.

• Child Endowment Plans

These are a combination of both life insurance and guaranteed returns. They, in general, include four payouts, each comprising 25% of the sum assured, including bonuses, until your child turns 18. Here, the risk is very low, but returns come out on the other side.

• Moneyback Insurance Plans:

Money-back plans are similar to endowment plans but come with an added benefit: they give you back a portion of your money at regular intervals. These payouts are usually a fixed percentage of the sum assured and are made every 5 or 10 years. This can be particularly helpful when you need funds at various stages, such as managing your child's education expenses as they arise.

Conclusion

Life insurance ensures financial protection when life is uncertain. It may, however, be unable to fulfill longer-term goals, such as paying for a child's education. That is where a child education plan becomes useful as it protects your child and maintains a fund for their future needs.