WHAT ARE CHILD INSURANCE PLANS?
Child Insurance Plans are the ideal way through which parents can financially secure their child’s future. From a very initial age of the child, parents can start investing a certain fixed amount every year which can be ascertained when the child attains a certain age or at the happening of a specific event like higher studies, marriage, etc. The significant stages of a child’s life can be secured conveniently through these plans. In certain plans, there are built-in flexibilities that waive off the premium and keep the policy active even after the death of parents. These options are very useful as no other alternative offers this option.
In this article, we will discuss certain significant aspects like features, benefits, and top providers of child insurance plans.
FEATURES OF CHILD INSURANCE PLANS
Either the premiums can be paid frequently on a regular basis for a limited period of time or they can be paid as a lump sum at the start of the policy period. Most insurance providers offer options such as monthly, quarterly, semi-annually, and annual payouts. In the case of traditional child plans, the premium amount differs as per the sum assured chosen.
The maturity corpus should opt with an eye on the future. This means that factors like inflation and interest rates should be taken into account else the released funds from the policy may fall short of the requirements in the future.
3. Policy Tenure:
The tenure of these kinds of plans can be selected from birth until the child reaches a predefined age. The insured/policyholder is not to be more than 70 years at a policy’s maturity.
Additional riders are also available which adds up to the life insurance policy. The riders are available in 3 categories, namely, critical illness, premium waiver, and accidental death and disability.
5. Segmented pay-outs:
With these plans, parents can opt if the child will get payments in yearly installments or in a lump sum. Such a facility will help in paying dues such as college fees, marriage expenses, higher education expenses, appropriate funds for starting a venture among others.
TYPES OF CHILD INSURANCE PLANS
In this, the investments are made into market securities like equity, debt, & other securities. The expected returns over a longer period of time is better than the traditional plans. The insured can even choose to invest in debt instruments, in which case it becomes identical to the traditional plans. The flexibility is totally in the hands of investors and switching in between the types of funds is also allowed.
2. Traditional plans:
These are plans where the amount of payout is guaranteed. The investments are usually made in low-yielding and safe products. The returns will not be great but they will be predictable and stable.
BENEFITS OF CHILD INSURANCE PLANS
1. Providing for immediate needs:
The life insurance coverage from children’s plans provides the amount to provide for the child’s regular needs and assist the family to meet regular expenses like school education, higher education among others.
2. Protection and security with waiver of premium:
The insurance amount from these plans can be used to meet the immediate and regular needs besides meeting the future needs of the child in the event of the unfortunate demise of the parent.
3. Income protection:
Some plans provide income protection by means of regular income to children which is equal to one percent of the sum assured if parents are no more to pay the premium.
4. Tax benefits:
Investors are not only eligible for deductions upto Rs. 1.5 lakhs u/s 80C of the Income Tax Act 1961 for premiums paid for child plans, but also benefit from tax-free maturity process u/s 10(10D).
HOW TO SELECT THE RIGHT PLAN FOR YOUR CHILD?
1. Goal and investment capacity:
The first thing you need to do is identify the goal and the amount you are ready to invest. Try to make an estimate of the amount you will spend on higher education and the marriage of your child. In this way, you will be able to choose the premium amount and policy term.
2. Planning and analysis:
After this, you should have a word with your financial advisor and research to calculate the sum assured in different plans. Go through a variety of plans from term plans, ULIP plans to savings plans and make an ideal choice.
Compare the different available plans on different grounds. Shortlist what seems to be ideal and suitable for your child.
TOP CHILD INSURANCE PLAN PROVIDERS IN INDIA
- Bajaj Allianz Young Assure
- Bharti AXA Life Child Advantage Plan
- Aditya Birla Sun Life Insurance Vision Star Plus
- ICICI Pru SmartKid Solution
- HDFCC SL Youngstar Super Premium
- Kotak Headstart Child Assure
- Max Life Shiksha Plus Super
- PNB MetLife College Plan
- SBI Life-Smart Scholar
- TATA AIA Life Insurance Super Achiever
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