What Is a Child Protection Plan?

Child Protection Plan

A child protection plan is a financial umbrella over kids for their use in the future. Parents can create this cover of protection through child plans that come with a life cover on the parent, income benefit, and market-linked returns. 

A key benefit that most child insurance plans offer is the premium waiver feature on the parent’s death. What this does is that when a parent dies, the insurer pays off all the remaining premiums for the policy. The policy keeps accumulating wealth through market returns till the end of the tenure. 

All these features combined create a triple benefit child plan that parents ideally look for. 

Key Features of Child Protection Plans

The best child plans are those that come with the following features - 

• Sum assured on death of the parent, premium waiver, and accumulated fund value at maturity. 

• Flexibility in the choice of the policy term, premium paying term, and high sum assured. 

• Coverage for parents from the birth of a child till up to 25 years of age.

• Capital guarantee at the end of the policy term meaning that the entire amount invested is returned back

• Choice of multiple fund options including high-risk equity funds and low-risk debt funds. 

• Option to switch between funds if their market performance is down. 

• Choice of investment strategy.

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What Are The Types Of Child Protection Plans?

You can choose a plan based on what future goals you would like to accomplish with the funds. It could be child education, marriage, wealth creation, etc. 

Briefly, child plans come with a life cover on the child or the parent. Your child will benefit from the latter which compensates for the loss of a parent. Further, you can either choose a traditional child plan, a child ULIP (unit-linked insurance plan), or a capital guarantee solution. Choosing which type of child plan to purchase will depend on your needs, budget, future planning, current savings, etc. 

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Why Buy A Child Protection Plan?

Here are a few reasons why you need a child protection plan - 

1. Death Benefits When The Parent Dies

   Nothing is scarier than not having a benefactor to support your child in your absence. At least with a life insurance cover, you can ensure that your kids get the death benefit amount on your passing. The amount can be used towards their education or to give wings to their dreams even when you are not around to support them anymore. 

2. Bigger Corpus Through Market-linked Returns

   The cost of education is growing as inflation scores. Your savings alone cannot possibly fund your kid's education be it in India or abroad. You need to take risks to grow a larger corpus. If the market performs well, you stand a chance to maximize your savings with the right child protection plan. Whatever amount you accumulate over the years, your child gets the whole sum at maturity. 

3. Increased Savings With Tax Benefits

   The premiums paid for a child protection plan and the final proceeds from it are eligible for tax relief U/S 80C and 10(10D) of the IT Act of India, 1961. Therefore, you are not only securing your child’s future but also saving a significant portion of your income every year from income tax cuts. 

4. Monthly Income For The Kids

   On top of all the above benefits, plans such as Max Online Savings Plan - Child Solution and Bajaj Allianz Life Smart Wealth Goal Child Plan come with a regular income for a specific duration. This amount can take care of your child’s daily needs through their school or college tuition.

Summing Up!

Child protection plans offer well-rounded financial compensation to a child in times of need. All the entitled proceeds from such plans go to the child once he or she comes of age. Parents that are covered under this policy can rest assured that no matter what the future holds, their children will have the financial freedom to pursue their dreams.