“Your child will build castles in the air; you better begin purchasing bricks for the castles today.” Loving your child is one thing that comes naturally to you. However, as a responsible parent, you also have certain insurance obligations towards your child. Securing your child’s future financially is one such obligation; in fact, the most essential one. And guess what? The Government of India allows tax rebates on many of these investments! So, when you are getting dual benefits, why not opt for these options.
In this article, we have listed down a few plans that can help you in securing your child’s future while saving taxes. Take a look!
Buy Term Insurance
From the moment the newborn arrives in the world, the expenses begin. And as the child grows up, expenses rise accordingly. A sense of duty sinks in, and parents start planning a savings mechanism for their child’s long-term requirements such as education or even marriage. The role of a term insurance plan becomes important in tackling such situations. The plan ensures that even if the parent is not around, the child’s goals are not compromised and are met on time.
The term policy is suitable for meeting this kind of risk arising out of an untimely death. Moreover, with term insurance, parents can claim tax deductions up to Rs. 1,50,000 under Section 80C. The premiums paid towards the insurance policy are eligible for deductions.
Buy Health Insurance for Yourself and Spouse
Health insurance is the most important product that you should have in your financial portfolio. Moreover, being a parent, you should be ready for any medical emergency that might come in the future. A health plan protects you from the significant treatment expenses that can leave a hole in your savings.
Moreover, it is advisable that both the parents purchase a health plan so that the money you save for your child does not get compromised due to your hospital bills. The Government of India also allows tax rebates on the premiums paid towards health insurance under Section 80D.
Set Aside an Emergency Corpus
Emergency corpus is a backup plan that helps you in managing the sudden, unplanned expenses. For instance, if you face a medical emergency, the corpus helps you in avoiding last-minute scrounging for money and taking loans from people to tide over the emergency. The corpus can also be for your household expenses, child’s school fee and others.
You can invest your money in liquid funds to generate a corpus that you can extract out easily. Moreover, the money earned as interest in liquid funds is not taxable till you take it out unlike that of savings account where the interest earned is taxable every year.
Invest in A Child Plan
A child Plan is an insurance-cum-investment plan that serves two purposes – financially secures your child’s future and finances the turning points in his/her life such as higher education and marriage. This plan provides a lump sum payout immediately on death, followed by regular payouts in the form of Family Income Benefit and the total Fund Value at the end of the Policy Term. When you purchase a child plan, you also become eligible to claim tax deductions under Section 80C up to 1,50,000, and the payouts on maturity/death are completely tax-free under Section 10(10D).
Moreover, Insurers like Max life Insurance fund all outstanding premiums after the death of the Insured. Thus, making it one of the best insurance investment plans a parent can purchase for his/her child.
Being a parent comes with a huge number of responsibilities. It may be hard to feel the urgency of securing every step of your child financially, but it is inevitable. You can purchase plans according to the long-term needs of your child– it can be buying child education plan for their education, an investment plan for their future needs or even a term plan to take care of their finances after you. So, start planning; it is never too late and never too early to prepare for the future.