Premium Waiver Benefit

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.  

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 ULIP products designed for children 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. 

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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.