Meeting a child's future financial requirements can involve a sizeable investment, particularly when higher education and professional training are factored in. Parents who want to build a fund over several years may consider insurance-linked savings products that bring together long-term financial planning and life cover. Life Insurance Corp. provides various plans that can form part of such a strategy.
Building a fund worth Rs 30 lakh will depend largely on the investment period, the amount paid towards premiums and the benefits offered by the policy. Starting early can give parents a longer period to accumulate funds. Before choosing a plan, they should check whether the projected maturity value is guaranteed or depends on bonuses and other variables.
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LIC Plans To Consider
LIC has three insurance products specifically designed around children's financial needs: Amritbaal, Jeevan Tarun and the New Children's Money Back Plan. While all three are intended to help parents prepare for future expenses, their benefit structures and payout schedules differ.
For families seeking a degree of certainty over returns, LIC Amritbaal may be worth considering. The policy provides guaranteed additions of Rs 80 for every Rs 1,000 of basic sum assured for each completed year, subject to the policy remaining active.
Parents can set the maturity age between 18 and 25 years and opt for either a single premium or limited premium payment. At maturity, the policy pays the basic sum assured along with the guaranteed additions accumulated over the term.
LIC Jeevan Tarun takes a different route by allowing policyholders to choose payout options that provide money during the child's growing years. The New Children's Money Back Plan is also structured around periodic payments, with survival benefits becoming payable at specified ages. Such payouts can help families meet education costs and other expenses without waiting for the policy to mature.
How Can You Target Rs 30 Lakh?
Parents should begin by identifying the point at which the funds will be needed. A family planning for a five-year-old child has a much longer period to build a corpus than one starting the process when the child is already 12. This difference can have a bearing on the policy term, premium outgo and the amount accumulated by maturity.
Amritbaal's guaranteed additions offer a basis for working out the potential maturity benefit. Before taking a decision, parents should assess how the basic sum assured, length of the policy and premium payment schedule fit their financial target. The premium payable will vary according to the child's age, selected policy duration and other relevant conditions.
Parents may also look at the Premium Waiver Benefit Rider. Available subject to eligibility and payment of an additional premium, this feature can take care of future premium obligations if the parent or proposer dies during the rider period.
What Should Parents Keep In Mind?
Building a Rs 30 lakh fund is only one part of the financial planning exercise. Parents must also consider what that money will be worth when it is eventually required. Inflation over a 15-20-year period could make a sizeable difference to the cost of higher education and other important milestones.
A comparison with alternative investment products can help families assess whether an LIC policy is the most appropriate route. Separate term insurance should also form part of the family's financial protection strategy.
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