Several types of insurance policies and plans help people in full feeling their financial goals in the long term. Different kinds of insurance plans such as retirement plans and child plans serve different purposes based on the policyholder’s different needs that ensure a consistent and decent future with no financial stress. Following is an analysis of retirement plans and child plans considering their benefits and types. The analysis will help potential plan holders understand the importance of different insurance plans to select the most suitable for them.
Retirement Plan Meaning
A retirement plan is a type of insurance plan or savings plan that allows plan holder to contribute a portion of their income to utilize it to maintain a consistent Lifestyle after their retirement. A retirement plan is also known as a pension plan because it provides consistent income after retirement by creating a fund during earning days. Retirement plans are essential to maintain a consistent living standard and protect individual finances in times of sudden tragic events and inflation. Individuals can invest in a retirement plan by evaluating their current financial situation considering expenses Assets and salary and by setting retirement goals with policy, and figuring out other options on the best allocation of your assets in retirement.
Benefits of Retirement Plan
- Are immensely beneficial for financial backup in the time of emergency.
- Provide good returns on investment as income replacement equivalent after earning stops.
- Provide tax deduction opportunities under section 80c of the Income Tax Act, India.
- Are cost-saving due to balanced premium amounts based on individual budgets.
- Provide peace of mind and financial Independence after retirement.
- Help in surviving inflation without impacting lifestyle and financial needs.
- Help plan holders stay in financial control by creating a consistent habit of saving.
- Provides death benefits to the designated beneficiaries in the form of an annuity or lump sum distribution.
Types of Retirement Plans
Deferred Annuity: A deferred annuity retirement plan is a suitable pension plan for conservative investors that provides a pre-decided pension amount after the plan holder attains a specific age every month. Deferred Annuity allows plan holders to subscribe to a low-risk product like a debt plan or equity and bonds of the capital market plan.
Pension funds with life coverage: It is a type of retirement plan that provides investment options for policyholders with post-retirement income benefits. This retirement plan allows the policyholder to enjoy a steady income after retirement and benefits of the designated beneficiaries in case of premature death of the owner.
Retirement mutual funds: retirement mutual funds are also a type of retirement plan that offers investment options to develop income and increase benefits after retirement by investing in less risky market products. Individuals are encouraged to invest in assets like Government Bonds, debt instruments, equity markets and Government Security as low-result investments in retirement Mutual Funds.
Employment-based pension plans: employment-based pension plans also refer to an employer-sponsored pension plan in which the employers and employees both need to contribute money to create a consistent source of income for employees after their retirement. The best example of an employment-based pension plan is the employee provident fund.
Child Plan Meaning
A child plan is a type of insurance policy that provides the benefits of insurance along with the opportunity to generate wealth through investment. A child plan provides financial support to the child if the parent dies prematurely to address their financial goals and needs in the future. In a child plan, a portion of the premium is utilized for increasing wealth through investments to support the financial obligations of the child’s life such as marriage and education.
Benefits of Child Plan
- A child plan offers tax benefits by reducing the taxable income up to rupees 1. 5 Lakh each year (if invested in the child insurance plan).
- Loan Collateral is a significant benefit of a child plan that helps to get a loan for a child’s education or marriage by making the child insurance policy collateral.
- The benefits of a child plan include partial withdrawal that helps investors address their sudden financial needs without taking alone from others.
- The premium waiver benefit is associated with the child plan in which the future premiums of the child policy are waived if the parent dies untimely or gets severely disabled.
- A child plan is a simple and great alternative to secure the financial future of a child to fulfill financial goals in the absence of the parent.
Types of Child Plan
Child ULIP: this type of child plan is a significant investment for parents to support their children’s education and other large financial goals in the future. It provides the benefits of insurance coverage along with the option of investing in funds for more wealth creation. It is a flexible and customizable insurance plan that provides the flexibility of premium amounts and allows policyholders to switch between types of funds during the policy.
Single-premium child plan: in this type of child plan the policyholder needs to pay the lump sum amount of premium only one time throughout the policy duration. The single premium child plan eliminates the stress of remembering the monthly due dates of premium payments. Several insurance providers also offer additional offers and appealing discounts on single-premium child plans.
Regular premium child plan: In this type of child plan the premium amount needs to be paid regularly based on the selected interval by the policyholder such as monthly, quarterly, half-yearly, or annually. The basic benefits of a child plan are associated in this type with a capital guarantee, sum assured, tax benefits, and partial payment option.
Conclusion
To conclude, the different types of retirement plans and child plans have different features with consistent benefits and security for the future of a policyholder and their loved one. People can select any type of retirement or child plan based on their needs and preferences to meet specific financial needs in the future.
