What is the Deferment Period Under a Child Plan?

A child insurance plan is one of the most recommended ways to accumulate wealth to fulfill future goals like education and the marriage of your child. When you buy a child plan, you are the owner of the policy, and your child is covered under it. However, when the child reaches a certain age becomes the owner of the child plan taken by you. The time frame during which the child insurance policy is purchased till the child becomes its owner is known as the deferment period. Let us learn more about the deferment period in the child plan.

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What is the Deferment Period in Child Plan?

The deferment period covers the period from when the policy starts to the time when the child becomes its owner. The period when the child becomes the owner of the child plan to the date of maturity of the policy is considered stage two of the deferment period under the child plan. 

How Does Deferment Period Under Child Plan Work?

The deferment period under a child plan consists of two stages – the first is the deferment period, and the other is the insurance period. While the deferment period is the time from when the policy starts, till the time the child becomes the owner of the policy. The insurance period is the time that covers the time when the child becomes the policy owner till the policy matures. 

The risk coverage under a child plan starts as soon as the child becomes 18 years old or becomes the policy owner. 

What Happens If?

You Want to Surrender the Child Insurance Policy: Generally, you can surrender your child insurance policy after three years. The guaranteed surrender value after the deferred date is:

  • 90% of the paid premiums excluding the premiums that are paid for the first year. 

After the deferred date:

  • If the deferment period is < 10 years:

    • 90% of the premiums that are paid before the date of deferment except the premiums paid for the first year. In addition, 30% of the premiums that are paid after the deferred date are also given.

  • If the deferment period is >=10 years:

    • 90% of the cash and 30% of the paid premiums after completion of the deferment period. 

Benefits of Buying a Child Plan:

The deferment period is one aspect of a child plan. There are some other benefits as well that you get if you opt for a child insurance policy, these are:

  • Maturity Benefit: You get the maturity benefit that includes the sum assured and bonuses that are declared at the time of the maturity of the policy. The maturity benefit is paid in a lump sum to the policyholder or his/her nominee.

  • Death Benefit: Apart from maturity benefits, the child insurance policies as well offer death benefits. You get a death benefit if the child who is insured dies after the completion of the deferment period. If the death of the child occurs before the deferment period, you get back all the premiums you have paid till the death.

  • Tax Benefits: The premiums you pay towards a child insurance policy are completely exempted from the tax under section 80C of the Income Tax Act, 1961. On the other hand, the amount you get as maturity is also tax exempted under section 10D. 

Over to You!

A child insurance plan is one of the best ways to provide a financially secure future to your child. However, it is suggested to keep the deferment period in mind as it also plays a major role in getting maturity and death benefits. Moreover, a deferment period under child insurance is also considered, if you want to surrender your child insurance policy.

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