Child Capital Guarantee Solutions: A Wholesome Financial Investment For Your Child

Parenting is one of the most important phases of anybody’s life. You have a responsibility of upbringing your child in the best possible manner. Education plays a bigger role in your child’s overall personality development. Nowadays, paying school/college fees is definitely going to burn a hole in your pocket as education inflation is about 10-12% in India.
Currently, the cost of studying in an MBA college is around Rs 20-30 lacs. For becoming a doctor, the college fee is between Rs 25-50 lacs. If your child plans to become an engineer, the fee is between Rs 10-15 lacs in India. The cost of higher education may get doubled considering the rate of education inflation, by the time your child turns 18 years old.
Therefore, it is advisable to start investing when your child is small so that when he/she turns 18, you have already built a huge corpus to fund your child’s higher education. Policybazaar offers Child Capital Guarantee Solutions which give a 100% capital guarantee to the investor apart from various other benefits that will help in achieving your child’s dreams.

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What is a Child Capital Guarantee Solution?
Child Capital Guarantee Solution plans are a combination of Unit Linked Investment Plans (ULIPs) and guaranteed return plans. Under this plan, around 50-60% of the invested amount goes into the guaranteed return products and the rest goes into ULIPs. You get the maturity value based on the upside on market-linked return from the ULIP component as well as returns on the traditional guarantee plan when your policy tenure ends.

The returns on traditional guaranteed components are 100% guaranteed. As far as the ULIP component is concerned, equity markets have given returns of about 12-15% returns over 15 years. For example, if you invest Rs 5,000 per month in HDFC Life’s Child Capital Guarantee Solutions,  your pay term is 10 years and the policy tenure is 20 years - Rs 3,000 will go into the traditional products, and Rs 2,000 will go to ULIP. At the end of the policy term, you get a guaranteed return of Rs 7.62 lacs (total amount paid) plus returns on the amount invested in ULIPs. In these plans, the premium payment frequency can be monthly, quarterly, half-yearly, or yearly. The minimum age of entry for investment under this product is 18 years and the maximum age of entry is 60 years.

Advantages
The biggest advantage of Child Capital Guarantee Solutions is that the premium you pay through the policy term is 100% guaranteed. This means, upon completion of the policy term a customer is guaranteed to get back all the premium invested, hence safeguarding their investments in the current economic downturn.

Another advantage is that there is a waiver of premium option in which the insurer pays the premium for the equity part of the portfolio if the customer dies during the policy term. In case of your absence, you certainly want that your child’s future is secured and his/her dreams are fulfilled. Thus, these plans ensure that your corpus continues to grow even in your absence and your child gets the maturity amount. 

In addition to it, life cover will be paid in the absence of the parents which will be more than the capital invested. This will take care of day to day expenses of your family in your absence. For example, Max Life Capital Guarantee Solutions provides life cover which is 15 times of annual premium. Suppose you invest Rs 60,000 annually in this plan, your child will get a life cover of Rs 9.16 lacs in case of your absence. There is also an income benefit in Max Life Capital Guarantee Solution wherein the customer’s family gets monthly income in case of their absence. This income is 1% of sum assured payable on a monthly basis. Apart from this, the plan also offers tax benefits under Section 80 C & 10(10D) of the Income Tax Act.

Keep a long term horizon
You can start by investing within 30 days of your child’s birth to build a huge corpus in at least 10 years. The maximum entry age for your child is 18 years. Keeping a long-term horizon gives good returns especially since its an equity-linked product, therefore you should start early. You can choose your policy term and premium paying term on your own depending on the time when your child will need the maturity amount to pursue higher education.

In HDFC Capital Guarantee Solution plan, if the policy term is for 10 years, pay term has to be 5 years. The minimum investment amount should be Rs 5000 per month. Whereas, if the policy term is 15-20 years, the premium paying term is 10 years. In this case, the minimum investment amount should be Rs 2,500 per month. In Max Capital Guarantee Solution plan, if the policy term is for 15 years, pay term is 10 years and the minimum investment amount should be Rs 3,500. Whereas if policy term is 20 years, pay term should be 10 years and the minimum investment amount should be Rs 4,500.
 
No physical processes
The entire buying journey is online. There is no offline process involved. You don’t have to step out of your home to buy the plan. If you have a pre-existing disease, there will be a telemedical or a video medical done wherein a doctor will speak to you over the phone about your medical history. Thereafter, policy will be issued digitally. After the payment, you only need to upload a copy of your Aadhar card and give your pan card number.

Why should you invest during Covid-19?
Historical data suggests that pandemic-driven market crashes are followed by big bull runs. During the SARS outbreak between January and March 2003, the Sensex had fallen by 11%. It went up nearly 80% after a year. Similarly, during the Zika outbreak, markets had fallen by 13.37% but after a year they had revived by 27.09%. Going by these trends, this may be a good time to start or even restart investing.

Sensex was at 41,945 points in January this year and crashed to 25,981 points in March because of the pandemic. It is now back to pre-Covid level and hovering at 48,000 points. In such uncertain times, when the markets are volatile, investing in a product that offers a 100% guarantee on the premium amount is a good option. If you invest in a pure market-linked product, you may not get good returns if the market goes down. This may hamper your child’s higher education needs. Moreover, you are getting additional benefits of waiver of premium option, life cover, and monthly expenses. So, Capital Guarantee Solutions is the way to go as it is providing wholesome financial protection to your child’s future.
 

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