Which Insurance Policy Is Better for Child Education?

Tailored child plans are the answer to planning financial expenses prudently and allocating future funds for the child’s education and marriage. So, let us explore further.

Understanding Child Insurance Plans

A child’s plan is tailor-made for securing the child’s future. Accordingly, two components meet your child’s future financial needs - insurance and investment. While the first protects your child from unforeseen events, the latter is an accumulation for education and marriage. The insurance covers risks helping unhindered education in the parent’s absence.

Child Insurance Plan Types

A typical child plan combines insurance and investment, focusing on the child’s future financial needs. Accordingly, insurers have designed plans aligned with the fundamental requirement of helping the insured children fulfill their aspirations.

1. Unit Linked Insurance Plans (ULIP)

   They are popularly referred to as ULIP and are investment-oriented insurance plans earning higher returns through measured investment in market instruments. They are ideal for long-term investment in harmony with the child’s future goals and life milestones. You can decide on the asset allocation to maximize returns for a hefty corpus on maturity.

2. Endowment Plans

   Traditional life insurance policies provide stable interest on the accumulated premium over the tenure. The plan typically adds a maturity amount with the annual interest and applicable bonuses. Here the returns are more conservative than the ULIPS as asset allocation is in debt instruments.

How Does a Child Insurance Plan Work?

The primary requirement for purchasing a suitable child plan is to fix the cover amount and the tenor. The premium depends on the insurance type you buy. Choose from the ULIP or Endowment type according to your preference.

In the next step, select the premium payment frequency for a quote.

It is pertinent to mention that you can choose premium payment in a lump sum or at convenient frequencies. In the event of your demise, your child continues to benefit from the policy.

On the other hand, if the child outlives the policy term, the maturity value is paid in a lump sum. In addition, some plans provide for periodic payments from the corpus to meet the child’s interim or mid-term financial needs.

Child Insurance Plan Features

The primary premise of child insurance plans is to provide a financial cushion to the insured child upon the parent’s demise in pursuing life choices. In addition, the policies offer great flexibility in terms of premium payment mode and frequency.

Some critical features of child plans are:

• Premiums: You can choose premium payments in a lump sum or regular in prefixed frequencies. Many insurers allow standing instructions for premium collection directly from the bank account. However, the premium is fixed depending on the sum assured, tenor, and plan type.

• Sum Assured: The cover amount you have chosen for meeting your child’s future financial needs is according to your current resources. Ideally, the sum assured must be at least 10 times the proposer’s gross annual income.

• Maturity: Choose the deemed maturity with an eye on the future. For example, if the child is 8 years and the plan tenor 10 years, the maturity is due when the child turns 18. Consider inflation and interest rates to decide on the prospective corpus.

• Tenure: You already know that child plans are long-term investments for children aged 18 and 21. However, you can define the policy term considering the plan is available from childbirth, but the proposer is not above 70.

• Periodic Payouts: You can choose a money-back child plan to meet milestones or in frequency to pay education fees and meet similar expenses.

• Premium Waivers: The premium waiver is integral to a child plan when the insured expires during the policy term, but the beneficiary continues with the policy without paying future premiums. However, the facility comes as a rider at an additional cost for comprehensive coverage in the child’s best interests.

• Riders: Most insurers offer various riders to augment the plan coverage at an additional cost. For example, accidental death, disability due to accidents, critical illness, and premium- waiver discussed earlier.

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Factors to Consider for Buying Child Insurance Plans

Here are some factors that you should consider before zeroing in on a child insurance plan:

• Claim Settlement Ratio: The CSR is a critical metric defining the insurer’s track record, listed annually by IRDAI, the insurance regulatory body. The percentage rate computation reckons the number of claims raised against the number settled.

• Coverage Amount: You need to factor in your age to decide on the coverage amount. The other factors to consider are your income and liabilities. In addition, compare various plans from different insurers and choose the one that safeguards your child’s future without making a dent in your pocket.

• Policy Term: Choosing a long term is ideal for a child plan as it covers the child even after maturity. Plan comparison helps you to choose policies with long tenors and lower premiums.

• Rider Benefits: Most insurers offer several riders that help you to enhance the plan coverage. However, some insurers include rider benefits in the primary policy. But, choosing riders for your specific needs is a good idea, even at a higher cost.

• Terms and Conditions: Every insurer defines its terms and conditions, and you must go through the fine print. The primary criterion is to check if the policy is beneficial and if there are no hidden conditions that may turn harmful in the long run.

How to Apply for a Child Insurance Plan?

You have reached a stage when you can think of applying for a suitable insurance plan for your child’s future. You have several options for buying the best-evaluated plan.

• Once you have selected a plan and an insurer, contact them directly through their official portal. Usually, insurers assign a representative to call on you and assist in completing the formalities.

• Alternatively, you can choose the online route using aggregator portals to select a plan and ask for quotes. Once you approve the quote, pay the premium, and the policy is yours. However, remember that the online route offers several advantages. For example, you can compare similar plans and get a lower premium quote.

Popular Child Insurance Plans

Here is an indicative list of 5 selected from the many child plans to enable you to make an informed choice. However, you should either read their plan details thoroughly or contact an insurance representative before making final payments.

1. HDFC YoungStar Super Premium

   The child plan offers insurance coverage and investment options simultaneously. It is a ULIP designed to meet your child’s life stages, including education, marriage, and others. The plan’s key highlights are:

   • The insurance plan is customizable according to your child’s specific requirements

   • The policy provides for 100% future premiums if the parent insured dies during the policy tenure

   • Under the Save-n-Gain variant, the beneficiary earns the maturity value, and HDFC bears 50% of the future premiums. In addition, the insurer pays the remaining 50% premium value as and when due.

   • You have four investment fund options to choose

   • The plan is available in 10, 15, 20 years tenure

2. ICICI Pru SmartKid Solution

   The ULIP policy covers your child comprehensively while accumulating funds for a better future. The plan’s salient features are:

   • Choose investments freely aligned with your child’s evolving needs

   • The all-round child protection covers a lump sum payment in the event of your demise during the policy term

   • Choose either the regular or single premium payment option.

   • The plan offers wealth boosters and loyalty additions

   • You can choose tenures between 10 and 25 years

3. Bajaj Allianz Young Assure

   It is a traditional savings insurance plan designed to inspire your child to achieve life goals. Let us look at some of the plan’s critical highlights.

   • The plan design offers financial security along with life coverage

   • You can choose from many riders to augment coverage at an additional cost

   • You have the flexibility to select multiple tenure and premium payment options

   • You pay a lower premium after rebate for choosing a higher sum assured

   • The maturity includes a vested bonus and an additional terminal bonus

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4. Max Life Shiksha Plus Super

   A child plan under the ULIP genre helps build a corpus for education and other financial needs. The key highlights are:

   • The policy covers your family comprehensively, along with your child’s educational expenses

   • The policy term is 15 to 25 years

   • The insurance plan offers 6 funds options to help build your corpus

   • Additional units accrue to the fund at the end of the 11th year

   • The child plan provides for partial withdrawals to meet financial emergencies

5. LIC New Children Money Back

   The plan provides attractive payouts at significant stages of your child’s growth. An ideal choice to meet your child’s future financial needs for education and wedding. Some of the critical features are:

   • The maturity value under this plan is the sum assured plus the vested bonuses

   • The plan pays 20% of the sum assured as survival benefit once the insured reaches a certain age

   • The high premium attracts a rebate

   • The child plan has a provision for loan

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In Conclusion

There is no way you would want to risk your child’s future as a parent. Especially, planning right is crucial when your child’s education and marriage are expensive affairs. The best bet is choosing a child insurance plan early for dual insurance benefits and investment for building a corpus for your child. There are many plans in the market but choose wisely to invest in a child insurance plan considering all the life’s variables.