Child Insurance Plans: Definition, Types, and Advantages

Hold your Child Hands with Child Insurance Plans Benefits

Every parent wants to provide the best of everything to their children. Child insurance plans help secure their future by giving wings to their dreams. Child plans ensure that money is not a problem when you are fulfilling important milestones for your child. Milestones such as education, higher studies, relocation, and marriage.

Child plans are a type of financial tool that helps you plan a secure future for your child. It provides dual advantages to your children. One is life insurance plan, and the second is savings and investment. In today’s world, child plans have become an absolute necessity. Here are the information and benefits of child insurance plans.

What are Child Insurance Plans?

Child insurance plans are child-specific insurance plans. They are a customized plan that offers several benefits and assistance for various stages of a child’s life. Generally, you can use a guaranteed returned plan or a ULIP plan to save corpus money for your child.

A child plan makes sure that you build a corpus over the long term and get good returns. You have a choice to pre-define the stages when you can use these returns. They are several types of child insurance plans in the market such as,

  • One-time Premium Payment Child Plans
  • Monthly/Annual Premium Payment Child Plans
  • Child ULIPs
  • Child Education Plan
  • Child Health Insurance Plan

A child plan can or cannot have a return-on-investment feature based on their interest-gaining or money-back policy terms, respectively. In the money-back policy, the child gets a lump sum for survival benefit at regular intervals exactly equal to the invested sum. These types of insurance plan can be helpful to those who need a lump sum amount at a time in the future. You should also note that these plans do not offer significant returns. So, if you need money for education expenses, then these plans might not be able to offset the impact of inflation.

An interest-gaining or investment insurance plan is a plan which provides a lump sum amount along with bonuses. You can use this type of plan to help create a corpus for your child’s higher studies expenses in the far future. These policies sometimes also offer a guaranteed return.

Top 7 Important Advantages of Child Insurance Plans

Secures Large Funds

Savings and insurance plans for children help support the regular needs of your child by offering money to help the family cover educational expenses. You want to provide the best education to your child, but the cost of education is rising day by day. So, you will need a good amount of savings to cover your child’s higher studies.

Support for Children When Parents are Not Around

The best help that child plans give is life cover. Some people purchase plans in their own name and keep the child as a nominee. And in case of the sad demise of the parent who provides the monetary assistance, the insurance money will go to the child. This money can help the child in their education or their day-to-day expense until they become self-reliant.

Different Modes of Returns

If you want to secure your child’s future financially, an insurance plan can cover it by offering a lump sum benefit in case of your demise during the plan tenure. Sometimes, they get the maturity benefits immediately. Otherwise, the insurance company waives off all future premiums, and the money remains invested till the end of the policy term. And the child gets the money at maturity, which can be useful to cover the education expenses.

High Returns at Maturity

All available child plans in the market offer return in the range of 8 – 14% by the time of maturity. This is much more than general insurance plans and best investment schemes. A child education plan such as ULIP provides you with options to gain more than this range. With proper knowledge of the bonds, you can choose between Dynamic Fund Allocation and Systematic Transfer Plan to further increase your gains.

Tax Benefits

Besides the high return benefits, child plans also provide tax benefits. These tax benefits for insurance plans are under section 80C of the Income Tax Act, 1961. The insurance returns apart from the invested capital that the nominee or policyholder gets from the insurance company also have tax exemption as per section 10(10D). However, tax laws are subject to change from time to time.

Partial Withdrawal Benefit

Child plans allow partial withdrawals from the account. These partial withdrawals are beneficial in case of any emergency. Also, if your child has a special talent in extracurricular activities with high-price equipment or tools, you can encourage your child to pursue it. Some plans also offer periodic payouts that are useful during the child’s life stages.

Adjustable Premium Paying Term and Policy Term

The best maturity time of any policy is when you think your children will need high funds. So, you have to choose the policy term wisely to meet the exact period. You can pay the premium amount in one go or at regular intervals for a certain period. Most life insurance companies offer annual, biannual, quarterly, or monthly payment options. They also give you a choice on the maturity amount payout. Depending on your chosen policy, you can either receive it as a lump sum payout or regular payments over five years or more.

Conclusion

It is necessary to stay secure with insurance plans during uncertain times. Before you invest in any insurance plan, you must know about the advantages it offers. Selecting the right insurance plan for your child’s protection is crucial for your child’s future. So before selecting the plan, always compare child insurance plans and insurance companies available in the market. It is also important to identify your needs and goals and the amount of money you require to cover your child’s higher education and other expenses.

Disclaimer:

The article is meant to be general and informative in nature and should not be construed as solicitation material. Please read the related product brochures for exclusions, terms and conditions, warranties, etc. carefully before concluding a sale.
Make responsible financial decisions. Consult with your financial advisor before making any decisions on insurance purchase.

Suggested Plans

Bharti AXA Life Guaranteed Wealth Pro

  • A non-linked, non-participating individual savings life insurance plan
  • Flexibility to choose the payout structure
  • Multiple income options
  • Option to receive tax free income beginning from the second policy year itself
  • Option to get lifelong income along with life cover till 100 years of age

Bharti AXA Life Shining Stars

  • Non-linked, non-participating limited pay endowment Life Insurance plan
  • Designed to take care of the financial needs of your child.
  • Flexibility to opt between 2 Maturity Payout Options
  • Flexibility in Policy Term/Premium Payment Terms
  • A great short-term investment option for a child insurance policy.

Bharti AXA Life Super Series

  • A non-linked non-participating individual life insurance savings plan
  • Range of investment duration and returns
  • Guaranteed money back benefits (provided policy is in force and all due premiums have been paid)
  • Income tax benefits (as prevailing tax laws in India that are subject to changes)