Life insurance for children

A child plan is the best financial tool that helps you to plan a secure future for your child and finance any major event in his/her life such as education, marriage, and so on. So, if you are looking to buy life insurance for your child, you can go through the below-mentioned information to choose the most suitable child insurance plan for them.

Types of Child Insurance Plans

Child ULIPs

It is an insurance plan which gives the policyholder three-pronged advantages i.e. high insurance coverage, disciplined investments, and participation in the equity market. Under this plan, the sum assured is paid to the nominee child on the death of the insured parent and the future premium is waived off ensuring that your children’s future dreams are fulfilled without putting any burden on them.

Unit Linked Insurance Plans

Unit Linked Insurance Plans or ULIPs are insurance plans where a part of the premium you pay is dedicated to life insurance to you and your family members while the remaining amount is invested in the markets. This means you get the dual benefit i.e. savings along with investment.

Child Endowment Policy

A child endowment policy is a traditional life insurance plan which offers protection as well as savings/investment benefit. Under such policies, the investments are put into multiple debt products based on the decisions made by the insurance company. The returns on such an investment are not very high, but there is guaranteed security for your money due to low risk.

Features of Child Insurance Plans

Premium amount

The premium amount is paid as a lump sum at the beginning of the policy tenure, or periodically. It depends on the maturity and sum assured. Most of the insurance companies also provide options such as monthly/quarterly/half-yearly/annually. You can choose any option which suits you the best. 

Sum assured

The sum assured means the amount that will be paid to the nominee/beneficiary in case of the policyholder's demise. Ideally, it should not be less than 10 times your current income. 

Policy term

It is important to choose the policy term wisely when you opt for any child insurance plan. For example, if your child is of 12 years of age, then it will be better to take a policy term for 6 years.

Maturity amount

One needs to consider various factors such as inflation and the interest rate while deciding upon the maturity amount of his/her policy. If you fail to consider these factors, you may fall short of the requirements in the future.

Waiver of premium

If the parent dies, the child gets the entire cover amount without having to pay for any further premiums to the insurance company. This ensures that there is no financial burden on the child, and he/she can live a secure and sound life.

Partial withdrawals

It is best to choose such child plans that allow you to partially withdraw the amount from the policy, whenever you come across any financial emergency. It will help you a lot especially when you do not have sufficient funds at your disposal to meet that urgency.

Benefits of Child Insurance Plans

Medical treatment

Hospitalization and medical care have become very expensive today. The child insurance plan comes to your rescue when your child needs medical aid; ensuring your child's future through such plans will not only safeguard their health but also save on huge medical expenses.

Educational purpose

An appropriate child plan can be your superhero in disguise if your child wants to pursue his/her career at any premium college. So, it is better to start early to reap the advantages of child plans so that you can afford the cost of your child’s education in the future.

Collateral security

Child insurance plans also act as added security against loans. In case of any need, you can use it to raise funds and fulfill your financial requirements.

Financial support

Child plans come with an added insurance benefit. So, when the parent dies the nominee child gets the amount at the time of maturity along with an annual payout every year. This helps the child to manage financial requirements in the event of his/her parent's demise.

Waiver of premium

A waiver of premium benefit in child plans gives relief to the insured from paying the premium amounts subject to certain conditions. Such as death or disability of the person who was paying the insurance premiums to the company.

Tax benefit

Besides the protection benefits and helping you save substantial amounts; a child plan also helps you to save tax. You are not only eligible for annual deduction from your total income of up to Rs 1.5 lakhs under Section 80C of the Income-tax Act, 1961, for premiums paid for child plans but you also benefit from tax-free maturity proceeds under Section 10(10D) of the Income-tax Act, 1961, subject to fulfilment of the terms and conditions stated therein.

How to apply for a child insurance plan?

After you have selected a plan from an insurance provider, you can either apply online or contact the company directly to get a quote. Alternatively, you can also use aggregator websites to find the right plan and apply directly through them. 

 What is the right time to buy child insurance plans?

Purchasing it early will help you to build a significant corpus for meeting future expenses such as your child’s higher education. Therefore, buying a child plan as early as possible is the prudent thing to do. You can purchase a plan for a child as young as 14 days old, with the policy tenure varying from 15–25 years.