Child Plans

What is a Child Plan?

Are you a parent who wants to ensure the financial security of your child's future? Then a child insurance plan might be the right choice for you!

A child insurance plan is a type of investment and insurance product that helps in planning for your child's future financial needs. It combines the benefits of both insurance and investment, which makes it an excellent choice for parents who want to secure their child's future.

The insurance aspect of the plan provides protection to your child in case of an unfortunate event, such as the death of the parent. In such an event, the insurance company pays a sum of money to the child, which helps in covering their financial needs.

On the other hand, the investment aspect of the plan allows you to create a corpus or a savings fund for your child's future needs, such as education or marriage. It helps you in investing money systematically over a period of time, which helps in building a good amount of money for your child's future needs.

In short, a child insurance plan provides a combination of protection and savings for your child's future. It can be a great way to ensure that your child has a bright and financially secure future. So, if you want to secure your child's future, consider investing in a child insurance plan today!

How Does a Child Plan Work?

A child plan is a type of investment and insurance product that helps parents in planning for their child's future financial needs. To understand how it works, let's take an example:

Suppose Mr. and Mrs. Sharma, parents of a 3-year-old girl, want to plan for their child's future needs, such as education and marriage. They decide to invest in a child plan.

They choose a child plan that requires them to pay a premium of Rs. 20,000 annually for 15 years. The total investment amount for the plan would be Rs. 3,00,000.

Now, let's see how the plan works:

Insurance aspect: The child plan provides life insurance cover to the parent(s) with the child as the nominee. In case of the unfortunate event of the death of the parent(s), the insurance company pays a sum of money to the child, which helps in covering their financial needs.

Investment aspect: The premium paid by the parent(s) is invested in a fund by the insurance company. The investment fund generates returns, and the money is invested systematically over a period of time. In our example, after 15 years, the investment fund would have generated a corpus of around Rs. 6,00,000 (assuming a return of 7% per annum).

Maturity benefit: At the end of the policy term, the parent(s) receive the maturity benefit, which is the corpus amount generated by the investment fund. This amount can be used to fulfill their child's future financial needs, such as education or marriage.

In our example, after 15 years, Mr. and Mrs. Sharma will receive a corpus of Rs. 6,00,000, which they can use for their child's future needs.

So, this is how a child plan works. It provides a combination of life insurance cover and investment returns to secure your child's future financial needs.

Types of Child Plans

Child insurance policies are a crucial insurance product in the portfolio, and almost all insurance providers offer them. Depending on individual priorities and needs, these child plans may vary on different parameters and come with customized and tailor-made features to cater to specific requirements.

• Traditional Child Plans:

  Traditional child plans are the most basic and conventional child plans that provide a guaranteed return on investment. They are also known as child endowment plans. These plans come with a longer policy term of 10-25 years and a lock-in period of at least five years. These plans provide a lump-sum payout on maturity or on the unfortunate event of the death of the parent(s).

• Unit-Linked Child Plans (ULIPs)

  Unit-linked child plans are market-linked child plans that invest in a mix of equity and debt instruments. They offer a higher potential return on investment but come with a higher risk as well. The return on investment is not guaranteed, and it depends on the market performance. ULIPs have a shorter policy term of 10-25 years and offer a choice of investment options.

  ULIPs offer the flexibility to switch between different investment options depending on the market conditions. The premium amount for ULIPs is divided into two parts- one part goes towards the insurance coverage, and the other part goes towards investment.

• Single Premium Child Plans

  With a single premium payment in child plans, you can stay worry-free from remembering due dates of premium payment. You'll not have to face any hassles of arranging finances for the premium payment. Moreover, some insurance providers offer attractive discounts or reduced premium on child plans, making it a more cost-effective option.

  In summary, traditional child plans offer a guaranteed return on investment, ULIPs offer a higher potential return on investment with higher risk, and child ULIP plans offer the dual benefit of insurance coverage and investment benefits. Before investing in any child plan, it is essential to compare the plans, their features, benefits, and charges, and then make an informed decision that suits your financial goals and risk appetite.

Key Features of Child Plans

Investing in a child insurance plan offers a plethora of benefits to secure your child's future. Not only does it provide a comprehensive maturity benefit and life cover, but it also enables you to make significant savings for your child's future without any hassle.

Let's delve into the different types of child plans and the benefits they offer.

Determine your investment horizon

Investment plans come with different tenures, so you need to determine how long you are willing to invest. This will help you choose an investment plan that aligns with your goals and offers the desired returns.

Education Corpus

A child plan helps you save for your child's future and build a corpus for their education. The amount you receive from a child education plan depends on the plan's terms and conditions and the amount you have invested in premiums.

High Returns

Market-linked child plans offer returns above 10-12%, beating inflation. You can choose from different funds to invest in, such as money market, hybrid, debt, and equity, along with dynamic fund allocation and systematic transfer plans.

Kitty for Medical Treatment

Child plans allow partial withdrawals, which can be useful when your child needs hospitalization due to an ailment or a medical condition. It can also act as an add-on for your health insurance plan.

Premium Waiver Benefit

If the insured parent passes away during the policy term, the premium waiver benefit pays the remaining premium, and the sum assured will be paid out to the nominated beneficiary at maturity.

Income Protection for the Child

Some child savings plans provide regular income equal to 1% of the sum assured if the parent(s) are not around to pay the premiums.

Collateral for Loans

Child plans can be used as collateral for loans for higher education or other child-related borrowings.

Partial Withdrawal to Enhance Talent

If your child has a special talent, you can encourage them to pursue it by making a partial withdrawal from the child education plan.

Tax Benefits

All child plans fall under the EEE category, offering the highest grade of tax benefit accorded by Indian Tax Laws.

Additional Riders

Additional riders like accidental death and disability benefit and critical illness rider benefit provide extra coverage.

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

You can choose the policy term and premium payment interval to suit your exact needs. You can also choose to receive the maturity amount as a lump sum or over a certain period, depending on the policy you choose. With various child plans available in India, you can choose the one that best suits your needs and secure your child's future.

Documents Required to Buy Child Plan

If you are planning to purchase a child insurance policy, you will need to provide certain documents. Here is a list of the documents typically required:

Child Insurance Claim Process

To ensure a smooth and prompt claims process in times of need, it is advisable to purchase a child insurance plan from an insurance provider with a high claim settlement ratio. The following is a general claim process for most insurance providers:

• In the event of any incident for which you need to make a claim, inform the insurance provider as soon as possible. This can be done online by sending an email or by calling the insurer's toll-free number or by visiting the nearest branch office.
• It is also necessary to submit a duly filled claim form, along with all relevant details such as the cause and date of the incident, nominee's name, etc.
• Once you have filed a claim with the insurer, you will need to provide any necessary supporting documents and reports.
• The insurance provider will appoint a surveyor to verify the case and supporting documents.
• If approved without further inquiry, the insurance company will transfer the claim benefit within 30 days of receiving the necessary documents.

Frequently Asked Question