Parents who have their children at Massachusetts Institute of Technology (MIT), Harvard University, and other best universities do so by planning. You too can have your child in any of the top institutions by understanding how a child education plan (CEP) works.
Meaning
CEP is an insurance policy bought by parents or guardians to take care of their child’s education in case the policyholder is unable to financially cater for the child’s education in the future.
Child education policy is for the benefit of a child since education is important towards achieving emancipation.
The term of CEP is majorly determined by age of the beneficiary and the payor. The minimum term is 10 years while the maximum term is 25 years.
This policy represents a combination of insurance coverage and investment opportunities, taking care of even your child’s extracurricular activities as well as other important career development expenses.
Types
Child ULIP Plans
This is designed to offer a lump sum payout when the policy term ends. Part of the premium is usually invested in other wealth-generating vehicles, like equity funds.
Child Endowment Plans
The policyholders are able to make periodic payouts as well as applicable bonuses. One of the standout features of the plans here is that they have guaranteed returns and flexible policy tenures, which mainly start when the ward clocks 18.
Moneyback Insurance Plans
This offers payouts after 5 to 10 years. Hence, this can be used to take care of ongoing educational expenses.
Benefits
Enough Resources For Education
Since it also represents an investment vehicle, you will enjoy impressive returns on resources. Being an insurance policy, you won’t have to bother about the types of taxes other investment tools come with. You will get a good measure of money that will ensure your child can get a quality form of education.
As a parent, you won’t have to be under financial burdens just to fund the education of your children.
Great Interest Rates
Typically, the plans come with very impressive interest rates, which means one’s total benefits from a single plan will beat several other options.
Life Coverage
The core purpose of the child education insurance plan revolves around its presentation of opportunities to invest in the education of your children.
However, one of the superb things that can’t be ignored is that you also enjoy life cover, which offers financial relief at the death of a member of the family.
Optional Health Coverage At Cheap Rates
You can include health insurance in a child education insurance plan. This means you won’t have to spend more resources to get another standalone health insurance for the child. While your child has his or her educational expenses settled, they are also covered if there should be an unexpected medical incident.
You Can Make Partial Withdrawal
Depending on the type of plan you opted for, you can also make partial withdrawals to settle emergencies when needed. Imagine if the family has a financial emergency and you have nowhere else to turn to – you can simply make a partial withdrawal on your child’s education plan and take care of the issue as soon as possible.
It works in such a way that permits you as the policyholder to obtain a loan of around 50 to 80 percent of the total fund you have committed in the plan (which includes the interest earned).
Substitute Backup Fund
You can take advantage of this policy to take care of other stuff that will be beneficial for your child, and not only their educational expenses. For instance, let’s say your child has business needs, you can take from the fund to get them empowered.
Guaranteed Capital
You don’t always come across investment vehicles that can guarantee you your capital even in the midst of market volatility and the likes of inflation.
If you subscribe to a child education insurance plan, you can be sure that nothing will touch your invested capital, irrespective of what becomes of the market situation. Don’t forget that all you get from your plans are tax-free.
Takeaways
A typical child education insurance policy is a strong system for financial security which every child deserves.
When the policyholder dies, the policy sees to it that the educational and financial needs of their child are met. Courtesy of its flexible terms, parents can always easily align the policy with their child’s educational needs.
A typical child education insurance policy also has loan benefits since it can be used as collateral to get education loans.