Child Insurance Plan: Secure Your Child’s Future Today

A child insurance plan offers dual benefits of savings & protection for the child’s secure future. It provides life insurance coverage for the parents & corpus funds accumulated by the parents for the financial future of the child. This ensures fulfilment of the child’s future needs even in the parents' absence. While some parents consider a Child saving plan to achieve long-term wealth accumulation, a child insurance plan still ensures financial protection for the future of your child.

Features of Child Insurance Plan

Provided are the features of a child's Insurance Plan:

• Life Cover

  These plans include life coverage, which protects the child's future financial goals in case of the sudden demise of the policyholder during the policy tenure.

• Protection from Death or Disability

  This plan takes care of the future premium amount even in case of the policyholder’s sudden death or disability, letting your children achieve their financial objectives.

• Systematic Withdrawals

  Some child plans offer options like automatic payments or systematic withdrawals, allowing the children to meet the financial requirements over a period of time.

• Bonus Additions

  Some of the plans offer rewards for being invested for a longer tenure. Where ULIPs, on one hand, add units as loyalty additions, money back child plans & endowment plans add a bonus amount. These bonuses can be availed at the time when the plan matures.

• Avail of Loans & Partial Withdrawals

  Some plans, such as endowment plans & child education plans, start building a cash value usually after 2-3 years. Hence, it allows one to avail a loan against the policy without any need to withdraw the funds or break the investment. In case of ULIPs for a child, it allows partial withdrawal of funds once the lock-in period of 5 years is completed.

• Riders

  These plans offer many different riders that can be added to upgrade the plan at some added cost, such as accidental riders, critical illness riders, waiver of premium riders, etc.

• Choice of Funds

  The insurance company offers investors an option to choose the funds among different options available, such as debt, equity, or money-market instruments.

• Premium Waiver Benefit

  This is an important feature of a child insurance plan, where in case the policyholder dies at any time during the policy tenure, the insurance company will be liable to pay the sum assured together with all future premiums till the maturity date.

• Lump Sum Benefit

  This plan entitles the nominees to receive a lump sum amount as a death benefit after the death of the policyholder.

• Taxation Benefit

  The premium paid towards the plan is eligible for tax benefit, maximum up to INR 1.5 lakhs u/s 80C of the Income Tax Act, 1961. Also, the maturity & death benefits are exempt u/s 10(10D) of the Income Tax Act, 1961. It does not attract any tax in case of waiver of premium, loan against policies, or withdrawals under ULIPs. Besides this, the critical illness cover, accidental death cover are also eligible for a tax deduction u/s 80D of the Income Tax Act, 1961. All these benefits provide tax savings, securing your child’s future & ensuring financial security & protection.

Tips to Choose the Best Child Insurance Plan

Provided are a few steps to choose the Best Child Insurance Plan:

Step 1: Know the fund requirement

While starting the process to buy a child's insurance plan, initially estimate the required funds. While estimating, consider that the expected returns should align with the education cost, & also, the returns should be received according to the milestones of your child’s life.

Step 2: Know the time horizon

Once you have decided on the amount of funds required, assess the time period for which you need to invest the funds, i.e. investment horizon.

Step 3: Choose a plan based on risk appetite

Next, select a plan depending on the risk appetite & the corpus funds required for the future of your child.

Step 4: Buy a plan that has adequate insurance coverage

Purchase a plan that offers a considerable amount of coverage to meet the financial requirements in the absence of their parents, i.e. in case of their parents' sudden demise.

Benefits of a Child Insurance Plan

Provided are the benefits of a child insurance plan:

• Financial Protection

  A child plan offers financial safety in case of the sudden demise of a parent, providing a lump sum amount.

• Mental Peace

  This plan offers mental peace to the parents when they know the future of their child is financially secure.

• Considers Inflation

  With the rising costs, these plans help match the inflation index of the economy.

• Higher returns

  Some of the plans are market-linked, hence providing higher returns as these funds are invested in the market.

• Saving Habit

  These plans create a habit of savings in individuals, with these savings compounding over a period of time.

• Lump Sum amount on Maturity

  These plans provide a lump sum amount at the time of maturity, which is chosen by you depending on your child’s future requirements. Also, some plans include waiver of premium benefit, which waives off all the future premium amounts even if the policyholder dies, hence providing continued benefit to the child in their parents’ absence.

• Investment Component

  Some of the plans, such as ULIPs, offer an investment component as well, such as equities, debts, or hybrid funds.

• Partial Withdrawals

  Some of the plans allow withdrawal of funds partially to fulfil their child’s needs once the lock-in period has been completed.

• Tax benefits

  The premium paid towards the plan is eligible for a tax deduction of a maximum of INR 1.5 lakhs u/s 80C of the Income Tax Act, 1961. Also, the maturity proceeds are exempt from tax u/s 10(10D).

Conclusion

Parents should look for a child insurance plan which ensures the financial security of their child, ensuring disciplined savings to meet milestones like education, marriage, etc. These plans provide taxation benefits with flexibility in premium payment options & worldwide coverage. It is always advised to start early by comparing the different plans available, reviewing them for correctness, & remaining invested for a longer tenure to build a strong financial base.