Is Having a Child Insurance Plan Really Worth the Cost?

When we talk about securing the future of our children, then a lot of investment instruments come in our mind in order to achieve the objective. As the upbringing of child is the major priority of every parent, it is important for every individual to do systematic planning in order to secure the future of the children.

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Investing in your child's future:A wise decision & a loving choice
Benefits of Investing In Child Plan
Waiver of Premium Benefit
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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Tax Benefits^
You get tax benefits under Section 80(C) and no tax on returns under Section 10 (10D)
Investment Flexibility
It offers the flexibility to invest at regular intervals or as a one-time contribution
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In order to fulfill the parents’ intension about providing best facilities for their children, numerous insurance companies have come up with child insurance plans. But prior investing in these plans it is important to know that how much beneficial it is. Are they really worth investing in? What are the best investment options for your child? To help you get the answer of these questions here we have discussed in details about how benefit it is to have a child insurance plan.

What is a Child Insurance Plan?

Child insurance plans are investment cum insurance plans offered by insurance companies and are similar as endowment and ULIP plans. Although, these plans have one difference i.e. Unlike ULIP and endowment plans, the parents need to invest in the child plan right from the time the child is born. Unlike child insurance plan the insured person can withdraw the saved amount once the child reaches to his/her adulthood.

How Much Insurance is Offered Under the Child Plan?

 In order to ensure the financial future of the child as sum assured in case of premature demise of the earning parents, the plan has its own inbuilt component. The minimum coverage that can be selected under this plan is: Sum Assured= term* Annual premium/2. But, unfortunately in most instances this sum assured is inadequate. According to the insurance experts, it is important to buy life coverage of least 7-10 times of the yearly income of the salaried parents.

One of the benefits of these policies is that the child is provided with adequate funds in case if the working parent meet with any eventuality or demises. So, it is advisable that an individual should check on many different options in order to avail the maximum coverage.

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Invest ₹10K/Month YOU GET ₹1 Crores* For Your Child View Plans
Invest ₹8K/Month YOU GET ₹80 Lakhs* For Your Child View Plans
Invest ₹5K/Month YOU GET ₹50 Lakhs* For Your Child View Plans
Standard T&C Apply *

About the Investments

Like endowment and ULIP plan, in child insurance plan a part of the premium paid goes towards paying the life coverage and the rest amount in invested in various investment instruments like equity, debt, etc. however, the portion deducted towards investment is very small, as the insurer deducts the premium allocation charge beforehand.

Resulting this, a very few part of the premium is invested during the initial years of the policy. Moreover, if the insured choose an option for any additional features provided by the insurance company like switching option or waiver of premium then the charges for the same is also deducted from the invested amount. So, initially these plans offer very low return and even if the insured end the plan without completing the tenure of the policy he/she might end up facing a loss.  

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What Aspects that are Covered under Child Insurance Plan?

A child insurance plan secures the educational future of the children. The child education plan offers the dual benefit of saving come protection. The plan is designed to offer financial security to the child so that their education may not hindered in the case of any unfortunate event in future. Child education plan provides 10 times more sum assured amount with the minimum premium payment option. The lump-sum amount paid on child education plan can be further used for education expenditure.

Secondly, during the tenure of child plan one can also avail the option of withdrawing money. It can be used for any medical purpose or for medical treatment of the children in case if they get ill. These partial withdrawals can be made very conveniently in the case of the child is hospitalized for any minor or serious medical condition.

One of the most important aspects of future planning is to plan for uncertainties. As life is uncertain, the parents should make sure that the child should not have a financial crisis in case of any eventuality. The insurance company offers a premium waiver during the tenure of the policy of a child plan if the insured passes away. Another advantage of having a child plan is that it protects the income of your children if they start earning at a very young age.

By evaluating the needs, one can invest in these plans, so that they can collect a sufficient corpus to provide a financial security to the child’s future. With a right approach and proper guidance one can zero in on the policy that provides that maximum coverage in an economical way.

You may also like to read: Best Child Insurance Plans in India

*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:- 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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