Child Insurance Plans: Best Purchased When Kids Are Still Young

Raising a child not only involves emotional affection but also involves money. Whether you are grooming an infant or a school-going kid, you must meet the expenses at different stages of your child's life. Every parent wants their children to have a perfect life. However, the 'perfect life' demands a secure plan. There are many challenges that you will have to face to become a successful parent.

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Investing in your child's future:A wise decision & a loving choice
Benefits of Investing In Child Plan
Waiver of Premium Benefit
Future Premiums are paid by the insurer upon death of policyholder
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Your premiums help your child achieve their dreams through lump sum or regular payouts
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You get tax benefits under Section 80(C) and no tax on returns under Section 10 (10D)
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It offers the flexibility to invest at regular intervals or as a one-time contribution
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Disclaimer: #The investment risk in the portfolio is borne by the policyholder. Life insurance is available in this product. The maturity amount of Rs 1 Cr. is for a 30 year old healthy individual investing Rs 10,000/- per month for 30 years, with assumed rates of returns @ 8% p.a. that is not guaranteed and is not the upper or lower limits as the value of your policy depends on a number of factors including future investment performance. In Unit Linked Insurance Plans, the investment risk in the investment portfolio is borne by the policyholder and the returns are not guaranteed. Maturity Value: ₹1,05,02,174 @ CAGR 8%; ₹50,45,591 @ CAGR 4%. *Tax benefits and savings are subject to changes in tax laws. All plans listed here are of insurance companies’ funds.

That is when the idea of a secure plan arrives so that you can provide a perfect life to your child. And the only possible way for this is to prepare well-informed financial planning.

For your child's bright career, secure financial planning can do great wonders. Higher education is expensive and given the current costs, the requirement of a secure financial plan is recommended to every parent. 

With a very basic understanding, you can say that a child plan is a blend of insurance and an investment that can help your child with funds to meet future needs at different phases of life.

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In today's time, you can buy several types of child insurance plans to safeguard your child's future against any life's uncertainty. However, not many people are motivated in India to buy a child insurance plan. The reason could be that it is still a new concept for so many individuals. But time and again as many people came to know about the child insurance plan they have bought it right after finalizing their requirements. 

Buying a child insurance plan comes with several benefits. Also, it is one of the few plans which provides maturity benefit. 

The best part is, you can compare child insurance plan not only with other insurance plans but also with other investment tools like fixed deposits and mutual funds. You will see, with a child insurance plan you are getting higher returns as compared to other investment tools.

Child insurance plans are the best way to receive higher interest rates on the investment. At the time of maturity, you will get an option of flexible pay, re-investment in equity, or repayment of the debt, etc. If you have the basic know-how of the policy, you can have a sound financial future for yourself and your entire family. 

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Basic features of Child Insurance Plan

Child plans offer you the dual role of financial security in terms of both investment tools and insurance products. Let's understand this in a bit detail:

  • Aids in terms of an Insurance product: In the event of the unfortunate death of the insured parent, the insurance company pays the premiums to keep the planned corpus in check which in turn keeps the sum assured in check and secures the child's financial future.

  • Aids in terms of Investment Plan: Child Insurance plan works like an investment as well, in case of no unfortunate death of the insured parent, at the time of maturity, the sum assured can be used to meet several needs such as higher education, new venture, marriage, etc.

The Right Time to Buy a Child Insurance Plan is when They are Young

If you are not thinking of buying a child insurance plan at present time. You must be ignoring one simple factor and that is 'inflation'. The average inflation rate will make the education cost along with other necessary expenses will make harder for you to bear after 8-10 years. 

The Industry experts suggest that it is better to buy a child insurance plan when your child is at least 5 years old. That way, you will be able to meet future expenses with ease. Depending upon the tenure of your policy you can make enough investment to support your child in financing the start-up, higher education, marriage, etc. 

Many child insurance plans offer smart maturity benefits by the time your child is 18 years old. This means the early you can start, the sufficient sum assured you will receive at the time of maturity. 

Child Savings Plan vs Sukanya Samriddhi Yojana Scheme and Public Provident Fund

Unique Triple Benefit
  • Future premiums paid by insurer on parent's death
  • Monthly income to fund child's education on parent's death
  • Lumpsum payout to family on parent's death
Returns
  • Return as of Apr 2024
  • 12%-15%
  • 8.2%
  • 7.1%
Availability
  • Availability
  • Girl Child or Boy Child
  • Girl child only
  • Girl Child or Boy Child
  • Max Entry Age
  • Upto 18 years
  • Upto 10 years
  • No Age Limit
Flexibility
  • Invested Amount can be Withdrawn after
  • 5 years
  • 21 years
  • 15 years
  • Conditions for Premature closure
  • Anytime after 5years
  • Extreme Compassionate Grounds
  • Serious Ailments or for education
  • Penalty on Premature Closure
  • No Penalty after 5 years
  • Returns reduced to Post Office Savings rate
  • 1% reduction in interest rate
  • Max deposit amount in an year
  • No Limit
  • 1.5 Lacs
  • 1.5 Lacs
Documentation
  • Documentation Required for Withdrawal
  • Low
  • High
  • Low
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Important factors to keep in mind

  • You must begin by preparing definitive goals, for instance, how much cover will be required for desired education. This will help you decide how much money you require to save each month to pay off the premium along with your other regular bills. Although, there is always an option to fund the studies via education loans. However, as your financial goal gets closer (Like a home loan, retirement plans, etc), it is advisable to lessen your equity exposure to minimize the risk of adverse market changes.

  • Before purchasing a child insurance plan always consider the inflation effect. Inflation leads to a significant increase in education expenses each year. Usually, education expenses rise faster than the inflation rate. Therefore, you should start saving for your children's education early along with the consideration of the time factor. The extra step is added when your child is planning to study abroad, you must consider the changes in exchange rates as well. If you will follow a wise investment strategy, you will be able to meet future expenses at ease.

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Final Words

With the arrival of private companies, the life insurance industry in India has seen remarkable growth over the years. Every company offers different benefits along with the child insurance plans however, you will enjoy the basic structure with added riders with almost any insurance company. It is advisable for you to do proper research on child insurance plans before investing your money in the same. You can compare plans online using the Policy Bazaar portal. Comparison around the right information will help you make an informed decision.

Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. This list of plans listed here comprise of insurance products offered by all the insurance partners of Policybazaar. The sorting is based on past 10 years’ fund performance (Fund Data Source: Value Research). For a complete list of insurers in India refer to the Insurance Regulatory and Development Authority of India website, www.irdai.gov.in
*All savings are provided by the insurer as per the IRDAI approved insurance plan.
^The tax benefits under Section 80C allow a deduction of up to ₹1.5 lakhs from the taxable income per year and 10(10D) tax benefits are for investments made up to ₹2.5 Lakhs/ year for policies bought after 1 Feb 2021. Tax benefits and savings are subject to changes in tax laws.
#The investment risk in the portfolio is borne by the policyholder. Life insurance is available in this product. The maturity amount of Rs 1 Cr. is for a 30 year old healthy individual investing Rs 10,000/- per month for 30 years, with assumed rates of returns @ 8% p.a. that is not guaranteed and is not the upper or lower limits as the value of your policy depends on a number of factors including future investment performance. In Unit Linked Insurance Plans, the investment risk in the investment portfolio is borne by the policyholder and the returns are not guaranteed. Maturity Value: ₹1,05,02,174 @ CARG 8%; ₹50,45,591 @ CAGR 4%
+Returns Since Inception of LIC Growth Fund
¶Long-term capital gains (LTCG) tax (12.5%) is exempted on annual premiums up to 2.5 lacs.
~Source - Google Review Rating available on:- http://bit.ly/3J20bXZ
^^The information relating to mutual funds presented in this article is for educational purpose only and is not meant for sale. Investment is subject to market risks and the risk is borne by the investor. Please consult your financial advisor before planning your investments.

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Insurers Offering Child Plans

Tata AIA

Aditya Birla Sun Life

Bajaj Allianz

Max Life

HDFC Life

ICICI Prudential

Bharti AXA Life

Edelweiss Life

Kotak Life

Future Generali

PNB MetLife

SBI Life

Aviva

Bandhan Life

Canara HSBC

IDBI Federal

IndiaFirst

Pramerica Life

Reliance Life

Sahara Life

Shriram Life

Star Union

View more insurers
Disclaimer: Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by an insurer.
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