Premium Waiver Benefit

In a child plan, the premium waiver benefit plays a crucial role in reducing the financial burden following the death of a parent. It waives off the future premiums payable against an insurance policy while keeping all the assured benefits intact.

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Why do you need to buy Child Education Plans?

When a child is born, financial planning becomes very important for a parent. Not only do you have to feed and house your child but also secure their future should anything bad happen to you. Further, inflation in the education sector is only making matters worse. 

Child education plans can help you overcome many challenges and plan your child’s future without burning a hole in your pocket. 

Here is how child plans can help you.

  • These offer combined benefits of insurance protection, savings, and investment. 

  • It offers financial assistance to the child after your death. 

  • It lets you create a corpus big enough to finance expensive higher education. 

  • The insurer pays future premiums on the death of a parent if the premium waiver benefit is opted for. 

  • You can save on taxes per the prevailing tax laws in the country.

  • Child ULIPs let you participate in market-linked funds and earn high returns.

The best child insurance plans offer a combination of all these benefits to ensure comprehensive financial protection to the child in your absence or otherwise. 

Here is a rundown of the premium waiver feature in a child plan and its significance.  

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What is the Premium Waiver Benefit in a child plan?

The premium waiver benefit makes the insurer liable to pay the due premiums on the death of an earning member. The child is now rid of the burden to pay premiums and enjoys uninterrupted benefits that come with the policy. 

Key Features of the Premium Waiver Benefit

  • There is no limit to the premium amount being waived off. 

  • Most child ULIPs come with an in-built premium waiver benefit. 

  • Most traditional endowment plans offer this benefit as riders on paying an extra sum. 

  • The rider is activated on the diagnosis of a critical illness, or accidental disability and death. 

People also read: Sukanya Samriddhi Yojana

How does Premium Waiver benefit you?

  • It allows premiums to stay invested for a longer term to generate higher returns. 

  • It does not jeopardize the original benefits that your child is entitled to. 

  • It eliminates the burden of premium payment in case of loss of income resulting from total / permanent disability, critical illnesses, and the death of the parent. 

  • It helps you save on taxes as the premiums are eligible for tax deductions under section 80C of the Income Tax Act, 1969. 

How does the Premium Waiver Benefit work?

Let’s understand this with the example of a child ULIP.

Such plans come with two components - insurance protection and investment in market-linked funds. The premium amount is usually distributed towards each as per your need. 

The returns based on the market performance of the funds accumulate and are offered to the child on maturity. The insurance component offers financial compensation to the child on your untimely demise within the coverage period. 

In the case of a normal insurance policy, as soon as the death benefit is paid out, the policy ceases. However, in child investment plans, the investment component continues to accrue returns till maturity but the burden of premium payment shifts to the insurer. This is made possible by the premium waiver benefit. This allows a significant corpus to be built for the child despite the absence of an earning member. 

Summing Up!

Child education plans are important to secure your child’s future till they are financially independent. Riders such as premium waivers offer extra protection by eliminating premium payments for grieving families. The benefits assured to the child continue as the policy progresses till the date of maturity. It is advisable to buy plans that offer this benefit as an extra layer to the financial safety net that you’re creating for your child.

*All savings are provided by the insurer as per the IRDAI approved insurance plan.
*Tax benefit is subject to changes in tax laws. Standard T&C Apply
^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 lumpsum benefit is calculated if policyholder invested ₹10000 monthly for 10 years in the fund with a policy term of 20 years. This Point To Point past performance data of last 10 years has been used to illustrate a scenario for the customers benefit. It is assumed that the past 10 years returns would have also been delivered in last 20 years. This is not guaranteed and not in anyway indicative of what the customer may actually get 20 years from now. The investment is subject to market risk and the risk is borne by the policyholder.
+Returns Since Inception of LIC Growth Fund
~Source - Google Review Rating available on:-
^^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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