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Child Insurance or Investment and Everything You Need To Know

Raising a child with the right values so that they turn into responsible individuals when they grow up is every parent’s task as soon as their child is born. On top of that, planning for their future is a whole different ball game. It is always advised that parents should jot down a plan that secures their child’s future financially when they grow up.

Here you will get a piece of better information about child plans, it’s benefits, how child investment and child insurance exactly work, and different child plans in India available.

What is a child plan?

A child plan is a financial plan that parents buy to secure their child’s future even when they are there or no more there to look after their child’s needs. Different plans work differently according to the need of the parents for their children.

Broadly, there are 2 types of child plans available in India:

Child Insurance Plan

A child insurance plan is an investment plus insurance plan offered by many companies for the safety of your child’s future dreams and goals. Child insurance plans provide a safety cushion to corpus your child’s needs in case of your untimely demise. When you are no more there to look around for your child, the child insurance plan invests money on your behalf and pays the amount promised for your child’s needs and requirements.

With a mix of insurance and investment products, the child insurance plan pays the lump-sum amount of the life cover at the end of the policy term. They are also generally customizable with options to add riders that enhance the Child Insurance plans.

Here are some Child Insurance Plans that are widely popular:

  • Child Endowment Plan
  • Child Moneyback Plan
  • Child Education Plan (ULIP)

Benefits of Child Insurance Plans:

  • Provides financial security
  • Offers a blend of both insurance and investment
  • Secures child future even after the demise of the parent
  • Favors long term savings plan
  • Option to add multiple riders

Child Investment Plan

Every parent wishes the best for their children from the start and invests for their future needs from the very beginning. For higher education and financial security of a child, Child Investment Plan plays a vital role. The rise of education costs and increasing future needs day-by-day makes it necessary for every parent to invest in Child Investment Plan.

Here are some Child Investment Plans that parents should look out for if they are planning to buy a plan for their child.

  • Sukanya Samriddhi Yojana
  • Equity Mutual Funds
  • Recurring Deposits (RD)
  • Public Provident Fund (PPF)
  • Systematic Investment Planning (SIP)

Benefits of Child Investment Plan:

  • Regular savings
  • Security of child’s future
  • Higher Education cover
  • Health cover

We have seen the different plans and their benefits offered under Child Insurance Plan and Child Investment Plan. For more clarity on the difference, let us pick one plan from each and compare them to understand the difference between the two.

While mutual funds are pure investment products, Unit Link Insurance Plans (ULIPs) serve the dual purpose of Investment and Insurance. Let’s dig in more to make an informed choice:

Features

Unit Link Insurance Plans (ULIPs)
Investment + Insurance Plan

Mutual Funds
Investment Plans

Working

Part of the premium is allocated to life cover. Rest is invested

Almost the entire amount is invested. Focuses on the growth of capital invested only

Key Benefit

Life cover + investments and other benefits

Long-term wealth creation

Tax Benefits

Premium paid is deductible under Section 80C

No tax deductions as such

Investment Charges

Fund management charges are deducted from the invested amount. Usually higher than mutual funds

Fund management charges are deducted

This will give some clarity between pure investment plans and investment + insurance plans.

In a Nutshell

As a parent, it is very important to ensure that your child’s future needs are met and can live a life you always thought they would. Investing in the right child plan as per your needs and financial capacity would be a wise step every parent should take. Investing in Child Investment Plan to create a financial cushion and to make better money or buying a Child Insurance Plan to provide financial protection for your child is your call. Make the best choice for a bright future!

Written By: PolicyBazaar - Updated: 28 May 2021
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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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