Child Insurance

Every parent the best for their children whether it is the standard of living, food habits or education. For each thing that you have in your mind regarding your child’s welfare, you have to plan and be prepared as the cost of living and education is fueling up every single day. Every parent seeks different investment plans so they can protect their child’s future in every possible way and one of the popular options is Child Education Plan.

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Tax Benefit
Upto Rs. 46800
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Life cover Till Age
99 Years
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8 Lakh+
Happy Customers

The core purpose to buy a child plan is to fund various milestones in the child’s life like higher education, marriage, owning a dream house.

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Child Education Plan is both policy and investment where the policyholder can withdraw after the minimum lock-in period. He/she can choose a plan according to their needs to save for their children’s future.

Advantages of a Child Education Plan

A best The best part of Child plans is they provide a life insurance cover to the policyholder. According to IRDAI, the sum assured can be up to 10 times the annual premium paid. For instance, if the yearly premium is Rs.10,000 then the sum assured turns out to be Rs. 1,00,000.

Investment Options: In the case of Child Endowment Plans, Insurance companies go for Debt or equity investments such as Bonds, Treasury bills, or even gold, etc. In Child ULIP plans some companies are giving an option for the selection of different types of funds and a percentage of how much will be invested in which fund.

Lock-IN Period: In most of the Child Education plans offered in India, there is a minimum lock-in period of 5 years. A partial withdrawal can be done once all the first five premiums of the policy. Also, the policyholder can surrender the policy after 5th year if he or she is in need of money while withdrawing all his investments.

TAX Benefits: Because the life insurance cover, the savings are tax-free under section 80C. Unless the annual premium paid exceeds Rs. 2.5 lakh, payouts from these plans are tax-free. If the yearly premium exceeds, the rules apply under the capital Gains taxation rules according to the finance Bill introduced in 2021.

Disadvantages of Child Education Plan

  • Limited Cover: The sum assured is very less. For example, you just get Rs.5,00,00 if you pay a premium of Rs50,000. When you compare such a policy with a term plan, the sum assured is way too much with a minimal premium.
  • Fewer Options of Investment: The policyholders have limited scope for investing when they opt for Child ULIP plans. The investment choices offered by the insurance provider are very limited. Moreover, in the case of Child Endowment Plans, Investments are made by the insurer, which restricts policyholders' investment options.
  • Limited Flexibility: As there is a minimum lock-in period of 5 years, there is no scope for any withdrawal. The scope limits as you can not change the allocation of funds with changing market scenarios and your personal needs. You are left with no choice, either you can continue with the existing one or surrender it altogether. As well, once a Child Education Plan becomes effective, its terms, such as premium payments, life insurance coverage, etc., cannot be altered.

With all the advantages and disadvantages, you have to select which plan is best for you and your child depending upon your needs and desires.

  • Commencement of the plan and its tenure: It is advisable to start investing the moment your child is born. Starting early means that you will always be a step ahead in fulfilling your child’s needs. Every parent has two priorities while planning. One is education and the other is a child’s wedding. You can calculate a respective amount you think can accomplish the future’s requirements. Also, keep in mind the extra-curricular activities as they are a compulsion these days because of the growing competition these days. Also if the term is longer, the accumulated corpus will be bigger.
  • Premium waiver benefit: Although it is a key feature in child education plans but make sure that this feature is there in order to secure your child’s best interests. In a situation of the untimely demise of the policyholder, all premiums get waived off and the policy continues actively. In other words, the nominee gets the death benefit as well as the maturity benefit.
  • Selection of Plan: It totally depends on the parent’s risk-taking and risk-bearing capacity. If you think that you can get more benefits from market-based plans you can go with them and if you want to play safe then endowment plans are your options.
  • Additional benefits:Instead of looking for add-ons and paying an extra premium, go for the riders that can be included in the policy like accidental benefit and critical illness. Both of them are uncertain and you never it will happen. So if you have the means, then you can add it to the existing premium.
  • Go through the policy document:Before investing in a child plan, read all the terms and conditions properly. Check for important dates and timelines for a quicker settlement process and timely claim. One hidden clause can change the entire plan that you had in mind for your child.
  • Settlement of the Claim:Last but not the least, you should also look into the settlement ratio as you have to pay for a longer period of time and wait for a few years for the policy to get mature. The companies change and their rules keep changing.

Keeping all tips in mind you can have a look at the different types of Child Education plans that are available:

  • Single Premium Child Plan: A lump sum amount is being paid by the policyholder at the commencement of the policy term. If you have the resources, then this plan is for you as it makes your life better with no stress of remembering the dates of the premium. Neither you have to arrange for any funds for paying the premium.
  • Regular premium Plan: Just like any other policy, you can pay the premium according to your convenience. You can choose monthly, quarterly, semi-annually or annual mode as per your resources.
  • Child ULIP: Giving a threefold benefit to the child. One, in case of the untimely death of the parent the child receives a sum assured immediately. Two, all the future premiums are waived. Three, at the time of maturity, a maturity amount is being paid to the child keeping the dreams and aspirations of the parent alive. Also, these are kinds of disciplined investments where you can choose how much and when to invest.
  • Traditional Endowment Plans: Similar to a life insurance policy which assures the safety of funds and security of the future. The premiums are paid for the policy term and a lump sum amount and bonuses are received at the time of maturity.

There are so many companies offering different child education plans. Keeping all the tips and pros & cons of policies you can compare or take help from our website okbima.com for a better experience and assistance. The motive behind buying a child education plan for any parent is that he doesn’t want to jeopardize his child’s future as the cost of education is reaching the skies. To cope with your future needs start planning today and buy a policy for your child and help him chase his dreams.

FAQ

What is a Child Insurance Policy?

A child insurance plan combines insurance and investing into one package. Even if something were to happen to you, the life insurance component ensures that your child is financially secure. The investment part helps you to expand your finances in order to ensure the future of your child. You can use the money you save to help your child achieve his or her educational and career goals. Because investing allows you to expand your money, it is a better option than saving, which cannot offset inflationary consequences.

What are the various types of Child Insurance Policy?

You can choose from the following types of child plans to safeguard your child's financial future:

1. Child Unit-Linked Insurance Plans (ULIPs): A ULIP is a combination of insurance and investing. Each year, the amount you pay to keep your plan operating is divided in half.
One portion is used to pay for life insurance
The other balance is invested in a variety of funds.

2. Children's Savings Accounts: You can invest in a child savings plan, but it is not connected to market returns or dangers. These plans include life insurance, maturity benefits, and tax benefits, making them a good and safe choice

What are the expenses that I'm putting money aside for?

This is the best place to begin answering this crucial question when selecting a child plan. It's critical to consider the type of schooling for which you're saving the corpus. Given today's competitive nature and the need of multidimensional development, it's critical that every child participates in extracurricular activities. If your child decides to pursue extra vocational training in a sector of their choice in the future, you must set aside sufficient funds.

When should I start planning?

Starting early allows you to invest for a longer period of time and build your money continuously. It occurs prior to deciding on a long-term investment strategy.

How will I know how much it will cost?

You must plan for your children's education expenses based on annual inflation rates when calculating how much to set aside.

What will be the maturity period?

Your plan's maturity phase is usually determined by your child's current age. Your child will be in college in 11 or 12 years if he or she is presently six years old. As a result, you must select a kid education plan with a minimum maturity period of ten to twelve years.

Is it possible to take money out of a child's plan in instalments?

A partial withdrawal feature may be useful if you need cash quickly before your plan matures. The ability to withdraw money at regular intervals could be extremely beneficial in meeting escalating educational costs.

Is there a Premium Waiver for this plan?

The majority of kid policies feature a premium waiver, which allows the policy beneficiary to continue to benefit from the plan after it has matured. If the policyholder dies, all outstanding premium payments are cancelled, and the nominee receives a guaranteed sum at maturity.

Is an endowment plan better than an equity-linked plan?

You can select one of them based on your risk tolerance. If you have a higher risk tolerance, you can invest in unit-linked child plans or equities for a period of 10 years or longer. If you're hesitant to incur investing risks, an endowment plan that is safeguarded against market volatility while still providing adequate coverage is a preferable choice. Endowment plans can be used for both savings and insurance.

Is There Any Money in the Budget Left Over?

Depending on the terms and conditions of your plan, you may be eligible for rewards. After the first year, bonuses begin to be credited, assisting in the fund's maximisation. A reversionary bonus might be straightforward or complex. A monetary incentive as well as a final bonus may be offered in some programmes.

How Much Money Will I Save In Taxes?

Section 10D of the Income Tax Act of 1961 exempts the sum promised from taxation, including any bonus claimed on maturity or due to the insured's death. Under Section 80C, the insurance premium is also tax deductible.