Every parent's priority is to financially protect their child's future. You always want to provide them with the best, be it life and education, even in your absence. You plan your finances in such a way that the family members are financially secured if anything happens.Read more
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So, if you are planning to start a family or have just started, then what you need is the right insurance plan that will help you protect your family’s future financially. It is important to research the best insurance plan for your family as there are various insurance plans available that are specifically designed to fulfill your needs.
Term insurance plans and child insurance plans are the common type of life insurance plans that will provide financial security to your child in long run. To secure the future of your child, it is important to understand both plans and their difference in detail:
A child insurance plan is a combination of life insurance and investment cover that helps in safeguarding your child’s future There are several child plans available in the insurance market. Mainly, when it comes to child insurance, parents are considered the prime policyholders, and children are the beneficiaries. The investment aspect of the plan helps cover the expenses of your child’s higher education and marriage depending on the earned returns. On the other hand, the insurance aspect safeguards the child’s financial future in the event of your unforeseen demise.
Term insurance is the purest and simplest form of life insurance product. It offers financial protection to your family members at affordable premium rates. With a term insurance plan, you can get a large amount of sum assured or life cover at a comparatively low rate of premium. The amount of benefit is paid to the nominee/beneficiary in case of the policyholder’s death during the policy term. Unlike a child insurance plan, you can buy a term plan at any milestone of life and customize it as you increase your family. The insurers in India help you to increase the policy scope along with rider benefits. Tax Benefits are also available under section 80C of the Income Tax Act, 1961.
The below table illustrates the difference between Child Insurance and Term Insurance. Through this table, one can get a fair idea of the best term insurance plan and child insurance plan.
|Criteria||Term Insurance Plan||Child Insurance Plan|
|Plan Type||A term insurance plan is a type of life insurance product||A child insurance plan offers investment as well as life insurance benefits|
|Premium Rates||The term insurance plan offers high life cover at affordable premium rates. To determine the premium rate of your chosen benefits and coverage, you can use a term insurance calculator.||The premium amounts for a child insurance plan will depend on the chosen coverage and benefits. Moreover, the insurance company invests continuously after your unfortunate death. Thus, the premium of a child plan tends to be more as compared to a term insurance plan.|
|Sum Assured Amount||This plan offers a lump sum amount to the children and beneficiaries after your demise.||In this, a lump sum benefit is paid to the children after your demise.|
|Payouts||Only death benefits are paid to the family members/dependents.||They offer money to the children at particular time intervals or life stages.|
|Tax Benefits||Tax benefits are available u/s 80C of ITA. The death benefit received by the beneficiaries is free of taxes u/s 10(10D).
Moreover, you can also avail of a tax deduction on the critical illness cover with your term plan u/s 80D of the ITA, 1961.
|Get tax benefit on the premium amount paid u/s 80C and the benefit/payout received from the plan is free of taxes u/s 10(10D) of the ITA, 1961.|
|Withdrawals||You are not allowed to make partial withdrawals under the term plan.||You are allowed to make partial withdrawals under child insurance. The benefit amount can be used to meet any financial expenses.|
Based on the above-mentioned points, now you must be aware of the difference between term insurance and child insurance. If you want to secure your child's financial future, investing in a child insurance plan is a smart decision. On the other hand, if you want to secure your whole family including parents, spouse, and children, term insurance is the right choice. Term insurance plans can be bought online at low premium rates with high coverages for 18-65 years of individuals.