5 Mistakes to Avoid When Buying Child Insurance Plan

After becoming a parent, the financial burden turns heavy on the shoulders specifically when the parent is the breadwinner of the family. If you are a parent and wish a secured and bright future for the child invest in a child insurance plan.

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Investing in your child's future:A wise decision & a loving choice
Benefits of Investing In Child Plan
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Future Premiums are paid by the insurer upon death of policyholder
Flexible Payout Options
Your premiums help your child achieve their dreams through lump sum or regular payouts
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rating
9.7 Crore
Registered Consumer
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4.9 Crore
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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.

Why Do You Need A Child Insurance Plan?

To be financially wise is to be a conscious consumer. You can't keep on spending money and expect your next 10 years to be in a financially stable situation.

It is important to support your child at every important milestone and build a corpus for them. There are plenty of options available for you to invest in to secure your child's future. However, you might want to consider avoiding common mistakes before buying a child insurance plan.

05 Mistakes that You Should Avoid Before Buying a Child Insurance Plan

  1. Overlooking the Future Cost of Education

    Whether you are plan to provide your child with foreign education or professional course within India. The education cost is going to be higher than the present time. Moreover, as per the current trends, overseas education will be 10 times higher than the average national educational cost. A child's current aspirations can be helpful to make assumptions for future lifestyle goals. In this scenario, you must avoid overlooking the future cost of education. You can also use a child insurance online calculator to determine how much you should invest in the child insurance plan to match the future educational expenses.   

  2. Underestimating Risk Appetite

    The policyholder must know, how much risk he or she can take. It is believed that higher risks possibly lead to higher rewards. However, everyone can't understand the market overnight and invest a hefty amount all at once. When it comes to investing in a child plan it is important to determine whether to go for mid-level risk to expect stable returns or no risk to expect low returns. It is advisable to opt for a long-term investment with mid-level risk to get desired returns in the future. 

  3. Opting for a Wrong Policy Term

    The policyholder needs to know when they will need the money in the future. Opting for a wrong policy term can either make you fall short of funds or the new costs for the same policy can make a hole in your pockets. It is advisable to wisely match the policy tenure with the child's future needs. For example, if money is required for higher education 16 years from now, a policy tenure of less or more than 16 years will not beneficial to your child.

  4. Not Insuring Your Life

    Do not be an ignorant individual when it comes to insuring your life. A child's financial need is one of the financial requirements in the family. However, do not mistake it as the only financial requirement. You can see your life cover as a protection cover for your entire family. In case if your family loses you due to an unfortunate event, your death benefit would aid your family. Besides that, in your absence, the child insurance plan will separately support your child at crucial stages in life. 

  5. Starting late

    This one is applicable for almost all kinds of insurance plans. The early you will start, the nominal premiums you will pay and the better returns you will get. A child insurance plan is no different. For instance, if you will buy a policy when your child is a newborn, by the time he/she will turn 18, you would have built enough corpus for them to pursue higher education. However, buying a policy when the child is in teen years would lead to inadequate funds. 

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
View Plans

Wrapping It up

A child insurance plan is of utmost importance for a better, bright and secured future for the child. It is advisable to do thorough research before buying a child plan. To determine what kind of plan will be the best suitable for your child's future, you must avoid making the aforementioned mistakes.

˜Top 5 plans based on annualized premium, for bookings made in the first 6 months of FY 24-25. 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. 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

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