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The Best Child Insurance Plan

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What is a Child Insurance Plan?

A Child Insurance Plan is a life insurance plan purchased by the parents to secure some financial goals for their children. It is a long term investment which helps the parents save money for important financial milestones like their child's higher education or marriage.

Child plans have a life insurance component and an investment component. The life insurance component helps prevent a sudden financial breakdown in the family in case something happens to the earning parent. The investment component helps build a financial corpus over a period of time which can then be used for the child's requirement.

Why Do You Need a Child Education Plan?

If your child's future is dependent on your current income, it is important to take steps to secure their financial future. By securing their future, you can ensure that the child's most important milestones will not be compromised under any circumstances. You should invest regularly in your child's future so that over a period of time, you can build a substantial amount which can then be used for the child's educational or other important requirements.

Key Features and Benefits of a Child Education Plan

The main features of a child insurance plan are as follows:

Guaranteed Amount on Maturity

You can invest regularly to time the maturity with some financial requirements when your child reaches a certain age

Life cover to the parent

In case of the unfortunate event of the loss of the income generation, the life cover can be used to fulfil the child's future needs

Tax Benefits

The premiums paid and the maturity amounts are tax free

Types of Child Plans

With-Profits Plans

Here the returns will depend on the bonus which is declared every year. You cannot know the amount you will receive on maturity. But can get an estimate based on the bonus amounts which have been declared in the previous years.

Guaranteed Return Plans

Here you know in advance the amount your will receive on maturity of the plan

Unit Linked Plans

These plans invest your money in market linked financial instruments like equity and bonds. These plans can offer better returns in the long term but come with additional risks. You can choose the investment areas depending on your risk profile.

How Much Should You Invest In a Child Plan?

This calls for some planning at your end. You will need to estimate the financial requirements for your child's higher education or some other goals which you have in mind.

How do Child Plans Work?

  • You pay regular premiums - monthly, quarterly, half-yearly or yearly
  • These plans are long term investments
  • The company invests your money
  • At the end of the policy term, the company pays you the invested amount with gains
  • The returns could be guaranteed or linked to the company or funds performance
  • You enjoy a life insurance coverage throughout the policy term

How to Get the Best Child Education Plan

  • Decide on the amount you wish to invest
  • Decide on the number of years you wish to pay premiums
  • Decide on policy term - when you wish to get your returns
  • Choose between “Guaranteed Returns” or “With Profits” plan
  • Compare returns and features

Child Plan versus Sukanya Samriddhi Yojana

Child PlansSukanya Samriddhi Yojana
Returns on MaturityReturns on Maturity
Life cover availableNo life cover
Can invest for any childCan invest only for girl child till she is 10
No limit on investment amountCan only invest Rs. 1.5 lakh per year
Guaranteed ReturnsSlightly higher returns, but rates can change every year
Offers tax benefitsOffers tax benefits

Child Plan versus PPF

Child PlansPPF
Returns on MaturityReturns on Maturity
Life cover availableNo life cover
No limit on investment amountCan only invest Rs. 1.5 lakh per year
Guaranteed ReturnsSlightly higher returns, but rates can change every year
Offers tax benefitsOffers tax benefits

FAQs on Child Plan

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Are Child Plans Tax Free?

Child Plans are tax free. The premiums paid are tax exempt under Section 80C and the maturity amounts are tax free under Section 10 (10d) of the Income Tax Act. It is best to check the tax implications at the time of purchase.
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What documents are required for buying child insurance?

  • KYC Documents - like PAN, Aadhaar
  • Income Documents - life Payslips, IT Returns or Bank Statements
  • Address Proof - like Aadhaar
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What is the Claim Process in a Child Insurance Plan?

Maturity Claim:

In case your bank details are updated with the insurer, the maturity amount will be credited to the bank account. You do not need to do anything.

Death Claim:

this is a standard process across life insurance plans

  • Fill up with claim form
  • Submit required documents
  • Insurance company verifies the documents and claim details
  • Claim is settled
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What are the Exclusions in a Child Insurance Plan?

The standard exclusions in a life insurance policy apply here. Here are some of them.

  • Suicide within the first year
  • Death due to criminal activities
  • Death due to substance abuse
  • Involvement in war or hazardous activities