Child Insurance Plan
A child insurance plan like ULIP offers a life insurance-cum-investment policy where the parent’s life is insured. The benefits (market-linked) are designed to support the child’s future expenses like education, healthcare, or marriage. When you buy a child insurance plan, you are choosing to stay ready for both expected and unexpected events in life.
It pays a lump sum and even continues to grow the money until maturity. Some plans also give regular payouts during the child’s growing years. This means your child’s big milestones stay safe, even in tough times.
Child insurance plans can also help with tax savings. The premium and benefit received are usually tax-free. So, you’re not just preparing for future , but also saving on taxes. Now, let’s look at the detailed benefits of a child insurance policy in simple words.
The Benefits of a Child Insurance Plan
A child insurance plan gives your child financial safety for the future. It helps you plan for education, health, marriage, and other life goals. This plan works like a mix of life insurance and savings. It supports your child, even if something happens to the parent. I In case of the parent’s untimely death during the policy term, some child insurance plans offer a Waiver of Premium benefit. This means that all future premiums are waived, and the policy continues without requiring further premium payments. Meanwhile, the child receives a lump sum amount or maturity benefit as per the plan terms. While many child ULIPs and some child plans include it automatically, in others might be available as an optional rider that requires an additional premium. This ensures your child’s future needs are not affected.
Additionally, certain child insurance plans provide regular payouts or periodic disbursements when your child reaches specific qualifying ages or milestones, such as starting college or other key life stages. These payouts are designed to help meet ongoing expenses related to education, marriage, or other financial needs during your child’s growth.
To summarise, a child insurance plan is designed to help your child achieve life goals and aspirations without the additional worry of finances. It also provides parents with peace of mind that their child will have the necessary financial support whenever it may be required.
Sudden Demise of Parents
One of the biggest benefits of a child insurance plan is that it protects the child if the parent (life assured) passes away during the policy term.
Here’s what happens:
- The child receives a lump sum death benefit to cover immediately arrived expenses .
- In many ULIPs, future premiums are waived automatically, meaning the plan continues without requiring further payments. However, in some traditional child plans, this waiver of premium benefit may be available only as an optional rider that requires an additional premium.
- The policy stays active until maturity, so the child still receives the maturity amount or periodic payouts.
Some child insurance plans, such as traditional child endowment plans, child income plans, and certain ULIP-based child plans provide monthly income for the child’s living or educational expenses.
This way, the child is not financially burdened and can continue school or college without worries. It also reduces stress on other family members. The goal is to make sure your child’s future dreams are protected, even if you are not there.
Tax Benefits
Most of the child insurance plans come with several tax benefits. These help reduce your tax burden while you save for your child’s future.
Here are the key tax benefits:
- Tax deduction on premiums under Section 80C of the Income Tax Act, 1961. You can claim up to ₹1.5 lakh per year, in case of old tax regime.
- Tax-free maturity amount under Section 10(10D), subject to certain terms and conditions.
- No tax on death benefits.
These tax savings, along with long-term growth, make child insurance plans an excellent way to plan ahead for your child's future.
No Loss to Paid Premiums
A child insurance plan protects the premiums you pay, ensuring your contributions remain secure even if market conditions fluctuate. This capital protection is typically offered by traditional child insurance plans like endowment or money-back policies, which provide guaranteed* maturity benefits. However, child ULIPs do not guarantee the premiums or returns, as their benefits depend on market performance.
Traditional child insurance plans, such as endowment or money-back policies, assure you a guaranteed* maturity benefit, which means the premiums you pay are protected and you will receive a minimum assured* amount at the end of the policy term. Additionally, the policy value may increase over time through bonuses (if declared) or assured* additions, depending on the plan’s features. This ensures that you do not lose the value of your contributions, providing financial security for your child’s future.
So, for those seeking a combination of safety and steady savings growth, a child insurance plan can be a suitable option.
Educational Support
A child insurance plan is designed to support your child’s education. It helps you save money early, so you don’t have to worry about high expenses later.
Here’s how it supports education:
- Pays for school or college tuition fees.
- Covers hostel, mess, and convenience charges.
- Helps with books, stationery, and exam fees.
- Offers payouts during major milestones, like school board exams or college admissions.
- You can choose plans focused only on higher education.
This way, you get peace of mind, knowing your child’s learning will never stop due to a lack of money.
Achieving Future Goals
Child insurance plans help your child achieve dreams beyond education. Even if your child chooses a different path, the plan can support it.
Key benefits include:
Maturity benefits
- Periodic payouts to support other goals, like starting a business or learning a skill.
- It can be used for events like marriage or overseas education.
- It ensures that your child’s goals, whatever they may be, stay within reach.
Developing A Savings Mindset
A child insurance plan not only secures your child’s future; it also teaches the value of saving.
Here’s how it helps build a savings habit:
- Encourages regular savings through monthly, quarterly, half-yearly or yearly premiums.
- Shows your child how planning can lead to bigger rewards later.
- Builds the habit of setting financial goals early in life.
- Makes the child more aware of money management as they grow.
This habit of saving early can help your child become financially responsible in the future.
Loan Collateral
One more useful benefit of some child insurance plans is that you can use it as a loan security. Check with your insurer for eligibility and conditions.
How it works:
If you ever need urgent money for your child’s education, health, or other needs, you can use the policy as collateral to get a secured loan. The loan amount depends on the policy’s surrender value. Since the insurer has already collected premiums, banks are more likely to offer a loan at a lower interest rate.
Advantages of a Matured Policy
When a child insurance policy reaches maturity, the nominee receives a maturity benefit. This benefit can include the sum assured (the initial amount assured by the policy) along with any accrued bonuses (if declared) or assured* additions, depending on the type of plan chosen. This maturity amount can be used for your child’s college, marriage, or other big expenses. It is also tax-free under the new tax regime,. A mature policy offers peace of mind and helps fulfill your child’s dreams.
To Conclude
A child insurance plan is one of the best ways to protect your child’s future. It gives you life cover, regular savings, and a way to support your child even when you’re not around. You can use the money for education, health, or any big milestone. Plus, you also enjoy tax benefits and peace of mind. Starting early helps you pay smaller premiums and grow your money better. If you want to stay prepared for tomorrow, a child insurance plan can help you take that first simple step today.
FAQs
What are the benefits of a child insurance policy?
A child insurance policy offers life cover for the parent and savings for the child’s future. It provides financial support for education, health, and marriage expenses. If the parent passes away, the child receives a lump sum payment, and the policy continues without needing future premiums. It is available under the premium waiver or waiver of premium feature. However, it is important to note that this feature is not available with all child insurance plans. Check terms and conditions beforehand. Some plans also offer monthly income. It also gives tax benefits under Sections 80C (only under the old tax regime) and 10(10D). These features make it a smart tool to secure your child’s future.
Is it good to invest in a child's plan?
A child plan prepares parents for future expenses for their child, such as education, college, health, or marriage. It combines insurance and savings for your child in one plan. In the event of an incident where you can no longer provide for your child, it will give financial protection for them. The premium is reasonable (most times) when you start early, and the maturity benefit is tax-free. Overall, a child plan is a great way to financially protect a long-term goal for your child, on top of being a reasonable and flexible solution that can give you peace of mind.
Which insurance policy is best for children?
The best child insurance policy is the one that provides life cover and helps meeting future financial needs in child education. A good policy would provide a maturity benefit, as well as a waiver of future premium payments if the parent passes away. However, not all plans offer premium waiver feature. It is advisable to check terms and conditions before making the final decision.
How to plan a child's future?
To plan your child’s future, start by setting clear goals, like saving for education or marriage. Choose a child insurance plan that gives life cover and savings in one. Begin early so you pay lower premiums. Make sure the plan offers flexible payouts. Review the plan benefits regularly. With regular contributions and the right insurance plan, you can prepare for every big milestone.
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