One of the most basic reasons why people invest in various plans and measure return margins is to facilitate the dreams and goals they want to financially support and realize in the long run. An investment plan is an integral tool in that pursuit. The idea behind wealth creation over an extended period of time is to live securely while also being relieved about the future and the expenses that one’s dependents may have.
To secure a child’s future is one of the foremost goals most investors work towards, where plans and payouts that can financially support a child’s expenses are most sought after. Higher education, marriage and asset purchases a child may require in the future can be supported by aforementioned plans. A favoured investment plan that investors are opting for is a Child Money Back Plan.
So, what is return of investment on a money back plan?
A money back plan is an insurance instrument that promises recurrent survival benefits to a policyholder during the course of the policy when they survive for a given period of time. As one can gauge from the name of the policy, it revolves around the policy having to start giving frequent payouts to the surviving policyholder while also providing coverage while receiving premiums from them to maintain said coverage.
It operates like a general insurance policy, with the added benefit of being able to get one’s money back in staggered payments from their insurance provider. A money back plan can be used to insure one’s children as well, where with the help of a Child Money Back Plan, an investor can secure their child’s future through survival benefits, assured sums and bonuses when they turn 25.
Since the basics of how a child money back plan works have been covered, let us look at the key features a potential policyholder should look out for in a child money back plan:
1. Premium Payments
A standard feature that is recurrent in most investment plans in India, it is the nominal payment that is paid to the insurance provider by the policyholder on a regular basis throughout the policy tenure. This payment maintains the coverage provided by the insurance provider and adds to the payout that is assured to the beneficiary at the end of the policy term.
For a child money back plan, the policyholder can choose their ideal payment frequency; which may be monthly, quarterly, bi-annually, or annually.
2. Maturity Benefits
A child money back plan has the coverage feature of a maturity benefit that can be availed by the policyholder which may be equal to the sum assured on maturity with the added bonuses (if availed) at the end of the policy tenure.
3. Sum Assured
Under a child money back plan there are certain types of assured benefits that are paid to the policyholder or their dependents during the tenure of the policy. The sum assured will be a cumulative sum from the survival benefit, profits and maturity benefit.
4. Survival Benefit
A survival benefit is the integral feature of the money back plan. At designated intervals throughout the policy tenure, the policyholder will be paid survival benefits for surviving the policy term. It is a standard feature for money back plans and the provisions stay the same for a child money back plan as well.
A policyholder of a child money back plan can also opt to participate in the profits acquired by the insurance provider as a corporation. These accrued bonuses will be added to the claim amount at the time of maturity or death.
Before investing in a child money back plan, a policyholder should duly compare plans across the market and choose the one best suited for their child. Let us look at some things one needs to know about a child money back plan before investing:
6. Free Look Period
In the event that a policyholder is dissatisfied with the terms and provisions of the child money back plan, they can choose to terminate and return the policy to the insurance provider within a period of 15 days. This return will require the policyholder to denote the reason for cancellation, and their paid premiums will be refunded along with incidental costs incurred in documentation or stamp duty.
7. Loan Facility
A policyholder can avail a loan against their child money back plan with the surrender value accumulated. This loan will be disbursed according to the existing terms of the insurance provider.
8. Tax Exemptions
The premiums paid towards maintaining a child money back plan are eligible for tax deductions under Section 80C of the Income Tax Act, 1961.
It is important to note however, that child money back policy is only eligible for tax deductions if the premium being paid is less than 10% of the assured sum which is to be paid to the policyholder at the end of the tenure.
This maturity benefit, when received, is also exempted from taxation if it is at least 5 times the premium amount. A child money back plan can be a useful addition to your investment plans and insurance coverage solutions while also giving an opportunity to earn significant benefits in the most secure way possible.
Reach out to the adept financial advisors and schedule a consultation to understand all the solutions offered by a child money back plan and build your child’s future now.
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