Implication of waiver of premium rider in child education plan
All parents wish to fulfill the dreams of their children and make them self-reliant by ensuring easy access to a world-class education. Education is the magic wand that can help your offspring touch heights of success. Towards this goal a parent needs to create a substantial fund accessible to the child even when he is absent due to unfortunate circumstances.
It’s always a prudent decision to invest in a child education plan and prepare for educational expenses right from day one, as amply demonstrated by the following points.
- Ever escalating costs of education
The rise in the cost of quality education due to Inflation etc causes a huge financial burden on the family’s resources. Systematically investing in a Child Education Plan from the very beginning ensures that sufficient funds are always available for the child in times of need. The Child education Plan also ensures that the child’s education is not interrupted due to paucity of funds in the case of unforeseen tragic circumstances.
- Save small amounts and reap handsome rewards
The premiums payable on Child Plans are affordable and add up to substantial sums of money at the end of the policy.
The sum assured can either be availed in one go or as consistent payouts to help meet the needs of various milestones of the child.
- High-interest Education loans need not be availed by the child
Systematic investment in Child Education Policy by the parent yields immeasurable benefits as the child needs not to take Education loans from the banks which usually come at a very high rate of interest. The student stays under debt and is constantly under pressure to pursue high-paying jobs to pay off the loans. This also hampers their ability to start saving or investing from day one of their careers.
- Ensures a bright future for the child
A systematic investment by the parents provides an umbrella of protection for the child and ensures that the education of the child will never be hampered even if the parents are no longer present. The child can pursue his/her dream career without any financial impediments.
- Tax Benefits
Tax exemptions or tax benefits can be availed on the Premiums paid on a child Education plan under Section (s) 80C, 80CCC(1), 80D, and 10(10D) as may be applicable.
- Easy access to a Corpus
A Child Education Plan allows the child to pursue their dream career and goals without letting financial constraints act as impediments.
Most plans have an option for payments as and when the child reaches his educational milestones. This allows flexibility for the child to select their career options.
What is a Premium Waiver Benefit?
This is a benefit in which future premium payments by the insured are waived off by the Insurance Company in the event of any unforeseen unfortunate event, for instance, loss of life of the parent or critical illness, etc in which the source of income of the family is lost. In the case of any eventuality, the future premiums are taken care of by the Insurance Company and the child will receive the full benefits.
The waiver of premium rider is an additional cover that one can buy to supplement the child’s education plan. However, most of the Child Education Plans already come with a premium waiver rider.
Is a Waiver of premium rider needed for your Child’s Education plan?
This is an important feature for any Insurance Policy, more so in the case of a Child Education Plan since as a parent you are the primary policyholder and pay all the premiums.
In case of any unfortunate circumstances or death, the policy will not lapse and your child will still get the entire sum assured even in your absence. This way your child’s future is protected at all times.
Advantages of Waiver of Premium rider
- Protection in case of death or permanent disability of the parent
In the unfortunate event of death or any other critical illness of the parent, wherein the family’s breadwinner is affected, and there is an inability to pay remaining premiums. The policy still holds good, as the company pays the remaining premiums. The child receives the sum assured and is not left in the lurch.
- The remaining premiums are taken care of by the company
In case of the death of the parent or any other critical illness, the remainder of premiums is waived off or paid by the Insurer.
- Tax Benefits
One can get tax benefits on the premiums paid. The premiums on riders are exempt up to Rs 1.5 lakhs under Section 80C of the Income Tax Act.
- Affordable premium rates
Most of the Child Education Plans come with an in-built waiver of premium rider. It can also be additionally purchased and added to the policy.
- The policy does not lapse
The policy holds good as premiums are taken care of by the insurance company in case of any eventuality.
Exclusions under a waiver of premium rider
Before purchasing the Waiver of Premium rider, it will be wise to study the main point of exclusion
- Death or injury due to nuclear attack, war, riots, and invasion
- Death or injury resulting from involvement in criminal activities
- Congenital diseases
- HIV / AIDS
- Injury or death due to hazardous activities or adventurous sports
- Injury or death due to ailments diagnosed during the policy’s waiting period
Some insurers require the policyholders to meet the fitness criterion to be eligible for the waiver of premium rider. It can be safely concluded that this rider ensures that your coverage does not lapse as a result of any unfortunate exigency.