Child Plans.

What is Child Plan?

A child education plan is designed to help children follow their educational pursuits in whichever field they choose. These plans come with a life cover and opportunities to maximize savings on the payment of due premiums. The lump-sum amount at the end of the policy term ensures that neither you nor your kid struggles for capital when it comes to financing higher education.

There are a number of options for you to look at when it comes to saving for your child’s secure future. The following table compares three different types of savings avenues.

Significance Of Insurance For Children

Insurance for children should not be overlooked given the uncertainty of life. Children are dependent on adults to feed them and finance their educational pursuits, among other needs. On the death of a parent, a child should not be made to struggle for funds to survive and access the basic level of care and education. This is why insurance for children is a must if you are a parent.

Are Child Plans Tax Free?

In addition to the death benefit and the annual income benefit, insurance buyers often look for tax saving avenues. It is noteworthy that child plans come with tax benefits like any other insurance scheme. Policyholders can claim deductions on their taxable income through such policies under Sections 80C, 10(10D), and 80DD of the Income Tax Act, 1961. Note that all the proceeds including death and maturity benefits from a child plan are entirely tax free.

Compare Best Child Insurance Plans in India

Insurance providers have been shelling out different kinds of child insurance plans, each serving unique needs of a concerned parent. Some of the popular ones are market-linked insurance policies, traditional endowment based policies, plans that offer periodic payouts, plans that come with lump sum payout, among others.

Given the range of options available pertaining to insurance for children, it is important that you carefully research and shortlist the ones that best suit you and your child’s requirements. The table below lists some of the best child insurance plans in India today.

Key Features and Benefits of a Child Education Plan

The purchase of insurance for children offers a wide range of exciting and unique benefits to the policyholder. It offers a comprehensive maturity benefit along with life cover to financially secure the future of the child.

Further, a child education plan will help you make sizeable savings for your child without having to run from pillar to post.

Let’s take a look at the benefits offered by the child education plan.

Corpus for Child’s Education

A child plan helps you save enough for the coming times and build a corpus for your child. The money available from a child education plan depends on the terms and conditions of the plan and on the amount one has invested in it by way of premiums.

High Returns Beating Inflation

All market-linked child plans offer returns above 10-12%. Most government schemes like Sukanya Samridhi Schemes offer much lower returns that do not beat inflation.

Further, a child education plan such as a ULIP plan enables you to choose the type of fund to invest (money market, hybrid, debt, and equity) in. You’re also given an option to choose from Dynamic Fund Allocation and Systematic Transfer Plan.

A Kitty for Medical Treatment of the Child

Child plans also allow the option of withdrawing money during the tenure of the child investment plans. Such partial withdrawals come in handy when the child is hospitalized due to an ailment, a minor accident, or a serious medical condition. The best child plan act as an add-on for one’s health insurance plan.

Supports the Child in the Absence of Parent(s)

Insurance companies offer a premium waiver if the parent (i.e., the insured) passes away during the policy term of a child education plan. With the waiver of Premium (WoP) feature, the sum assured will be paid out to the nominated beneficiary, while the due premium for the remaining policy term is paid by the insurance company.

At the maturity of the policy, the child is entitled to receive the maturity amount as a lump sum payout promised at the time of purchasing the best child plan.

The premium waiver benefit often comes inbuilt with the best child education plan.

Income Protection for the Child

Some child savings plans provide regular income to children, which is equal to 1% of sum assured if parents are not around to pay the premiums.

Acts as Collateral for Loans for Higher Education

Higher education is expensive, whether one plans to send the child to a private college or university in India or abroad. A Child plan comes in handy if one intends to secure a loan for higher education as these are allowed to be used as collaterals.

They can also be used as collateral for other child-related borrowings.

A child’s plan is a great education policy and the best investment plan for the child. The child education plan also instills discipline and helps form the habit of saving to secure the child’s future.

Partial Withdrawal to Enhance your Child’s Talent

If your child possesses a special talent like playing an instrument or acting, then you can encourage your child to pursue it further by making a partial withdrawal from the child education plan. Moreover, some of the plans offer the option of periodic pay-outs that can be used to encourage the child’s talent further.

Tax Benefits

All child plans fall under the highest bracket of tax exemption i.e. E-E-E category. This is the highest grade of tax benefit accorded by the Indian Tax Laws to schemes like PPF.

Additional Riders

Certain riders are available, which give you more than just a simple life insurance policy. These riders are available in three sub-categories:

Accidental Death and Disability Benefit – The Accidental Death and Disability Rider Benefit pay the extra sum assured in the event of your unfortunate mishap causing death or disability.

Critical Illness Rider Benefit – Critical Illness rider benefit offers coverage for a pre-determined set of critical diseases.

Flexibility in Policy Term, Premium Paying Term, and Benefit Payout

When you realize that your child should get on his/her feet is the best time for the policy to mature. Choose the policy term to meet the exact period.

The premium amount is subject to the sum assured and the amount of maturity benefit you opt for. You may opt to pay the premium amount at regular intervals or for a certain period. Most of the life insurance providers offer options such as annually, semi-annually, quarterly, and monthly mode of payment.

When it comes to the maturity amount payout, you can choose to receive it as a lump-sum payout or over 5 years or more, depending on the policy chosen.

*All savings are provided by the insurer as per the IRDAI approved insurance plan. Standard T&C Apply

Types of Child Plans

Mostly all the insurance providers offer child insurance policies as a vital insurance product in the portfolio. These child plans may vary on different parameters basis the individual priorities and needs and come handy with customized and tailor-made features.

Different types of Child Plans in India are:

Single-Premium Child Plan

The policyholder pays a lump sum amount in the form of a single premium for the entire policy term and stays worry-free from remembering the due dates of premium payment. You’ll not have to come across any hassles of arranging finances for the premium payment. Some insurance providers additionally offer appealing discounts or reduce the premium on child plans.

Regular Premium Child Plan

Unlike a single premium child education plan, regular premium child policy offers you flexibility on payment of premium. You can pay the premium monthly, quarterly, half-yearly, or yearly.

Child ULIP

Child ULIP plan gives you a three-prolonged benefit, along with higher insurance coverage, contribution in the equity market, and disciplined investments. Three benefits mean that the nominated beneficiary, i.e. the child receives the sum assured on the demise of the insured parent or guardian. The future premiums are waived off and the maturity amount is paid when the policy matures, making sure that the future dream of your children is fulfilled.

Traditional Child Endowment Plan

When it comes to the child endowment plans it is essentially a traditional life insurance plan that provides security and savings. It enables you to save over some time and on policy maturity receive the lump sum amount. A child endowment plan will act as a financial wherein the financial objectives for the benefit of your child will be fulfilled. The premium is invested in debt instruments while the decision is kept with the insurance company. The bonus payable at maturity decides the returns.

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