Enhancing financial security with waiver of premium in child investment plans

Enhancing financial security with waiver of premium in child investment plans

Investment-cum-insurance products are becoming increasingly popular among Indian parents because of their dual benefits. They provide life insurance coverage, ensure financial protection for the child in case of unforeseen events, and provide avenues for wealth creation through investment in various funds.

“Who will pay the premium if something happens to me? What will happen to the plan?” – is one question that many investors grapple with. One striking add-on option that comes to their rescue in a situation like this is Waiver of Premium due to death, which kicks in if the policyholder passes away. For parents, nothing is more important than securing their child’s future and this option can be a saving grace, if something were to happen to them.

How WOP secures your investment

Such products consist of two primary elements: Insurance protection and investments in market-linked funds. Typically, the premium is allocated between these components based on your requirements. Profits derived from the market performance of these funds grow over time and are given to the nominee when the plan reaches maturity. If you were to pass away during the coverage period, the insurance component provides financial support to the nominee. Unlike standard life insurance policies where the coverage ends once the death benefit is disbursed, these plans persistently grow the investment component until maturity. With the WOP option, the responsibility for premium payments is transferred to the insurer.

Activation criteria for this option is clear-cut: it comes into effect upon the death of the policyholder, ensuring that their dependents do not have to deal with the added burden of premium payment while they are grieving.

Also Read: Tips to effectively manage money as a couple

WOP in Child Plans for an added layer of security

School and college education expenses have been on the rise, recording an inflation rate of 11-12%, which is higher than the 6% general cost price index (CPI) inflation. Whether it’s tuition fees, books, or other school-related expenses, the costs just keep going up.

To keep up with these escalating costs, many parents are now choosing investment tools to create a corpus for their kids’ future needs. Child investment plans, in particular, have become a popular choice for Indian parents. These are tailored investment tools that ensure your child’s financial stability even in your absence. They include a life cover, providing a cover 10 times the annual premium, and optional add-on feature – the Waiver of Premium, ensuring the insurance company covers future premiums in case the policyholder passes away. Here are some of their key features:

Comprehensive blend of insurance protection, savings, and investment opportunities.Provides financial support to your child in the event of your demise.Facilitates the accumulation of a substantial fund for financing higher education.The insurance company covers future premiums following a parent’s death under the WOP option.The premium paid towards child plans qualifies for deduction up to Rs. 1.5 lacs under Section 80C.Child ULIPs offer participation in market-linked funds, yielding attractive returns.

As a rule of thumb, always compare multiple plans online before you make an investment to choose the one that suits your needs best.

(By Vivek Jain, Head – Investments, Policybazaar.com)

Disclaimer: This is the author’s personal opinion. Readers are advised to consult their financial planner before making any investment.