Education Money

How is a Child Education Insurance Plan More Beneficial Over an Education Loan?

How is a Child Education Insurance Plan More Beneficial Over an Education Loan?
Written by Medhaavi Mishra

Generating funds for children’s future goals, such as education, can be difficult. Child education insurance plans and education loans can provide parents with funds to meet such an objective. However, it can be confusing for parents to understand which option is better.

In this article, we will explain the benefits of child plans and why they are better than education loans.

One of the objectives of every parent is to ensure their child receives the education he/she wants. However, as the cost of education can be very high, it can become difficult for parents to pay for such expenses. Thus, many look for options that can help them generate funds to meet their child’s future education costs. Primarily, there are two options that many parents rely on. One is an education loan and the other is a child education plan.

Why Education Loans Aren’t a Good Option?

While education loans can help in providing funds to pay for education expenses, they can put the child under a financial burden. This is because the loan must be repaid. It can become difficult for a person to repay the loan if he/she has a low income. If the individual is unable to get a good job quickly, then he/she will be unable to repay the loan. This can lead to huge financial problems. Therefore, it is recommended to start saving for the child from an early age.

Why Child Plans are a Better Option?

Child plans allow parents to accumulate funds during the investment tenure. Thus, it can be a great option while creating a financial plan for the child. It can help build funds to meet education expenses. Apart from helping build funds, it can also provide life cover.

The Benefits of Investing in Child Plans

  • Child Plans Can Provide Financial Protection

One of the benefits that child plans can offer is life cover. In case the policyholder passes away during the tenure of the policy, the insurer can offer the life cover amount that can help meet the future expenses. The amount of money the beneficiary can receive is specified when the policy is purchased.

  • Child Plans Can Provide Investment Benefits

Apart from providing life cover, child plans can also provide investment benefits. Parents can choose a plan based on their risk appetite. For instance, if a person has a high-risk appetite, then he/she can opt for a unit-linked insurance plan (ULIP). ULIPs can allow investors to invest in equity funds, debt funds, etc. Therefore, with the help of such plans, parents can earn better returns.

  • Child Plans Can Provide Lump Sum Amount on Maturity

Child plans can offer a lump sum amount when the policy matures. The maturity date can be selected based on when the child will need the funds. The investment can grow during the term of the policy. Thus, it can help the parents pay for the child’s education expenses when the policy matures.

Selecting Between a Child Plan and an Education Loan

An education loan can become a financial liability for the child in the future. However, a child plan can enable parents to accumulate funds during the investment tenure. These funds can be used to pay for the education expenses. Hence, such a plan will not cause any financial burden.

About the author

Medhaavi Mishra