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Child Insurance Plan Myths Debunked

For parents, one concern that often overrides all other concerns is that of their child’s future. For instance, as per one report, 51% of Indian parents want their children to have successful careers, while 49% ranked happiness in life as the important goal for their children1.

Investment plans also act as tax-planning tools, as many avenues help reduce tax liability. There are different types of investment plans, and by choosing the right one, you can invest according to your needs and grow your savings.Read Less

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Written ByPalak Bagadia
AboutPalak Bagadia
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Palak Bagadia, Associate – Digital Marketing at Bajaj Allianz Life, with experience spanning content and performance marketing, recruitment, employee engagement in the BFSI industry.
Reviewed ByRituraj Singh
AboutRituraj Singh
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Rituraj Singh,With over 6.5 years of experience in the insurance industry, Rituraj Singh, Manager- Product & Brand Marketing at Bajaj Allianz Life Insurance overlooks new product launches, compliance, and brand projects, leveraging artificial intelligence and technology to enhance outcomes.
Written on: 7th July 2024
Modified on: 7th July 2024
Reading Time: 15 Mins
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Fortunately, such goals may be achieved by ensuring that the child is financially secure with a life insurance policy aimed towards the protection of a child’s needs. Child insurance plans are a kind of life insurance plans that aim to provide financial support at various stages of a child’s life in achieving various milestones at different age. Despite the gradually increasing popularity of child insurance plans, there are still some persistent child insurance plan myths, which can lead to some people being hesitant to purchase them.

With an aim to raise awareness and reduce financial misinformation, we break down these misconceptions and aim to shed light on the truth.

 

Child insurance plans: Myths vs. the reality

 

Myth #1 - The life insured in a child policy is the child

Reality - Many people are reluctant to buy child plans because they believe that the life insured under such a plan is the child. And so, it is deemed unfavorable to buy a life insurance policy in the name of a child. However, this could not be far from the truth as the life insured under a child plan is the adult guardian of the child. In some cases, it is the parent and, sometimes, the grandparent.

The reason they are called child plans is that the primary focus is on the child’s education, future goals, health, and so on. You may also come across such variables when you are using the child education plan calculator when planning for your child’s financial future.

Myth #2 - A child plan ends when the primary policyholder passes away

Reality - Since child plans are ultimately life insurance plans, one of the common misconceptions attached to them is that they end once the policyholder passes away. This is not true, however, a child plan can continue to function until maturity and provide benefits to the child even after the passing away of the parent subject to the terms & conditions of the plan.

The aim of a child insurance plan is to ensure that the child’s financial needs are taken care of, and this is taken care of by the plan, whether the parent is around or not.

Myth #3 – For child insurance plans with an option of availing waiver of premium rider, premiums have to be paid even after the policyholder’s demise

Reality - Many think that a child plan will not be financially viable because the responsibility for the life insurance premiums falls on the remaining family members after the passing away of the policyholder.

Insurance companies understand this predicament and, therefore, offer riders at additional nominal premiums, under some child plans, that can take care of the premium aspect after the policyholder’s demise. For instance, the waiver of premium rider waives off all future life insurance premiums, under certain child plans, if the policyholder is diagnosed with a critical illness, undergoes a disability-inducing accident, or passes away.

With some child insurance plans, such features may be in-built, i.e., a part of the base coverage of the plan.

Myth #4 - Child insurance plans do not provide wealth accumulation or generation benefits

Reality – Such child plan myths are not true, since companies offer plans with different benefits based on your goals. If you are looking to generate long-term wealth along with providing financial protection for your child’s future, you can opt for a Unit-Linked Insurance Plan based Child Plan.

A ULIP offers the dual benefit of a life cover and market-linked returns. However, one must get an understanding of the risks involved in market-linked investment before investing.. You can also opt for a savings-oriented child plan, which offers the benefit of accumulating wealth via low-risk, fixed-income securities.

When the plan matures, the beneficiaries of the policy receive the accumulated fund value, subject to the conditions present in the policy.

Myth #5 - A child insurance plan does not provide liquidity benefits

Reality - A child insurance plan is designed to equip the parent (and the child) with financial security at various milestones in a child’s life. And so, there are opportunities to receive pay-outs at designated intervals for the child’s various goals, such as pursuing higher education abroad.

One can also make partial withdrawals on a ULIP based child plan after the lock-in period has ended subject to conditions stated in the policy. Thus, a child insurance plan in the form of a ULIP, can be said to have moderate liquidity depending on the terms and conditions of the plan.

Myth #6 - A child insurance plan can only be used to fund education

Reality – Parents usually buy child insurance plans with the motive of funding their children’s education, the benefits of the plan can be used for other purposes as well like child’s marriage when he/she reaches the age of marriage. The maturity benefit that the policyholder receives on outliving the policy term can be used to pay for different life goals focusing the child. However, since education costs tend to increase over time, parents opt for a child insurance plan with higher studies in mind. If that is your concern as well, then you can use a child education plan calculator to review the costs you may have to incur.

As seen from the above busted myths, a child insurance plan may help in having a certain amount of mental peace when it comes to your child’s financial future. To make sure you buy a plan that suits you and your child, get in touch with an insurance advisor or a financial expert.

Source:

1https://timesofindia.indiatimes.com/blogs/minorityview/indian-parents-have-very-high-expectations-about-their-childrens-education-and-careers/

BJAZ-WEB-EC-01877/22

Child Insurance Guide

Long term investment plans - What Are Their Benefits?

A suitable financial plan may be defined by its components. Amongst other things, one aspect, it may be incomplete without, is a steady amount of investment.

Read More
Long term investment plans - What Are Their Benefits?

A suitable financial plan may be defined by its components. Amongst other things, one aspect, it may be incomplete without, is a steady amount of investment.

Read More
Long term investment plans - What Are Their Benefits?

A suitable financial plan may be defined by its components. Amongst other things, one aspect, it may be incomplete without, is a steady amount of investment.

Read More
Long term investment plans - What Are Their Benefits?

A suitable financial plan may be defined by its components. Amongst other things, one aspect, it may be incomplete without, is a steady amount of investment.

Read More
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~Tax benefits as per prevailing Income tax laws shall apply. Please check with your tax consultant for eligibility.

The above information is for general understanding and is meant to educate the general public at large. The reader will have to verify the facts, law and content with the prevailing tax statutes and seek appropriate professional advice before acting on the basis of the above information.

The views stated in this article are not to be construed as investment advice and readers are suggested to seek independent financial advice before making any investment decisions. For more details on risk factors, terms and conditions please read the sales brochure & policy document (available on www.bajajallianzlife.com) carefully before concluding a sale.

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*Tax benefits as per prevailing Section 10(10D) and Section 80C of the Income Tax Act shall apply. You are requested to consult your tax consultant and obtain independent advice for eligibility before claiming any benefit under the policy.

~Individual Death Claim Settlement Ratio for FY 2023-2024

1Premium Holiday has to be selected at inception to avail this benefit and also depends on other policy terms & conditions


Bajaj Allianz Life Insurance Co. Ltd. | IRDAI Reg. No. 116

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I hereby authorize Bajaj Allianz Life Insurance Co. Ltd. to call me on the contact number made available by me on the website with a specific request to call back. I further declare that, irrespective of my contact number being registered on National Customer Preference Register (NCPR) or on National Do Not Call Registry (NDNC), any call made, SMS or WhatsApp sent in response to my request shall not be construed as an Unsolicited Commercial Communication even though the content of the call may be for the purposes of explaining various insurance products and services or solicitation and procurement of insurance business

 

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%%Above illustration is for Bajaj Allianz Life eTouch- A Non Linked, Non-Participating, Individual Life Insurance Term Plan (UIN: 116N172V03) considering Male aged 25 years | Non-Smoker | Policy Term (PT)– 30 years | Premium Payment Term (PPT) – 30 years | Sum Assured opted is Rs. 1,00,00,000 | Online Channel | Standard Life | 1st Year Premium is Rs. 6,238. 2nd Year onwards premium is Rs. 6,659. Total Premium Paid is Rs. 1,99,349 | Medical Rates | Yearly Premium Payment Mode | Death benefit opted is lumpsum payout and monthly installments (Lumpsum Payout Percentage : 45, Income Payout Percentage : 55) | Premium shown above is exclusive of Goods & Service Tax/any other applicable tax levied, subject to changes in tax laws, and any extra premium and is for illustrative purpose only. This is inclusive of all the discounts mentioned above.

##Tax benefits as per prevailing Section 10(10D) and Section 80C of the Income Tax Act shall apply. You are requested to consult your tax consultant and obtain independent advice for eligibility before claiming any benefit under the policy.Above Tax benefit is calculated considering deduction of Rs. 150,000 and applicable tax rate of 31.20%.

@Term Insurance plan bought online directly from Bajaj Allianz Life Insurance has no commissions involved.

^^The Return of Premium amount is total of all the premiums received, exclusive of extra premium, rider premium and GST & /any other applicable tax levied, subject to changes in tax laws
Bajaj Allianz Life Insurance Co. Ltd. | IRDAI Reg. No. 116

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Bajaj Allianz Life eTouch- A Non Linked, Non-Participating, Individual Life Insurance Term Plan (UIN: 116N172V04)

*Tax benefits as per prevailing Section 10(10D) and Section 80C of the Income Tax Act shall apply. You are requested to consult your tax consultant and obtain independent advice for eligibility before claiming any benefit under the policy.Above Tax benefit is calculated considering deduction of Rs. 150,000 and applicable tax rate of 31.20%.

~Individual Death Claim Settlement Ratio for FY 2023-2024

1Premium Holiday has to be selected at inception to avail this benefit and also depends on other policy terms & conditions


Bajaj Allianz Life Insurance Co. Ltd. | IRDAI Reg. No. 116


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^Subject to Section 10 (10D) conditions i.e. aggregate annual premium for ULIP policies issued on or after 1st February 2021 does not exceed Rs. 2.5 Lakhs.

1Minimum premium mentioned is applicable for Bajaj Allianz Life Goal Assure IV - A Unit-linked Non-Participating Individual Life Savings Insurance Plan (UIN: 116L204V01) and is subject to policy terms and conditions.

#Source: https://economictimes.indiatimes.com/investments-marts/eight-crucial-numbers-to-ensure-financial-success/10-times-the-annual-income-is-your-life-insurance/slideshow/16699748.cms . Subject to availability in Bajaj Allianz Life ULIP Plans. For more details on risk factors, terms and conditions please read sales brochure & policy document (available on www.bajajallianzlife.com ) carefully before concluding a sale.

*Benchmark: Nifty 500 Multicap Momentum Quality 50 Index past 5 CAGR Returns, as on 31st December 2024. Past returns of a fund are not necessarily indicative of the future performance of the fund. | Please consult the financial advisor before investing.

The Unit Linked Insurance Products do not offer any liquidity during the first five years of the contract. The policyholder will not be able to surrender or withdraw the monies invested in Unit Linked Insurance Products completely or partially till the end of the fifth year.

ULIPs are different from the traditional insurance products and are subject to the risk factors. The premium paid in ULIPs are subject to investment risks associated with capital markets and the NAVs of the units may go up or down based on the performance of fund and factors influencing the capital market and the insured is responsible for his/her decisions. Bajaj Allianz Life Insurance Company Limited is only the name of the Life Insurance Company and Bajaj Allianz Life Future Wealth Gain IV - A Unit- linked Non- Participating Individual Life Savings Insurance Plan (UIN:116L202V01), Bajaj Allianz Life Goal Assure IV - A Unit-linked Non-Participating Individual Life Savings Insurance Plan (UIN: 116L204V01), Bajaj Allianz Life LongLife Goal III is A Unit-linked Non-Participating Whole Life Insurance Plan (UIN:116L203V01), Bajaj Allianz Life Invest Protect Goal III - A Unit-linked Non-Participating Individual Life Savings Insurance Plan (UIN: 116L205V01), Bajaj Allianz Life Magnum Fortune Plus III - A Unit-linked Non-Participating Individual Life Savings Insurance Plan (UIN: 116L207V01), Bajaj Allianz Life Goal Based Saving III - A Unit-linked Non-Participating Individual Life Savings Insurance Plan (UIN:116L206V01) and Bajaj Allianz Life Smart Wealth Goal V - A Unit-linked Non-Participating Individual Life Savings Insurance Plan (UIN: 116L201V01) are only the name of the unit linked insurance contracts and does not in any way indicate the quality of the contract, its future prospects or returns. Please know the associated risks and the applicable charges, from your Insurance agent or the Intermediary or policy document issued by the insurance company. The various funds offered under this contract are the names of the funds and do not in any way indicate the quality of these plans, their future prospects and returns. For more details on risk factors, terms and conditions please read sales brochure & policy document (available on www.bajajallianzlife.com ) carefully before concluding a sale.

Nifty 500 Multicap Momentum Quality 50 Index Fund is available Bajaj Allianz Life Future Wealth Gain IV - A Unit- linked Non- Participating Individual Life Savings Insurance Plan (UIN:116L202V01), Bajaj Allianz Life Goal Assure IV - A Unit-linked Non-Participating Individual Life Savings Insurance Plan (UIN: 116L204V01), Bajaj Allianz Life LongLife Goal III is A Unit-linked Non-Participating Whole Life Insurance Plan (UIN:116L203V01), Bajaj Allianz Life Invest Protect Goal III - A Unit-linked Non-Participating Individual Life Savings Insurance Plan (UIN: 116L205V01), Bajaj Allianz Life Magnum Fortune Plus III - A Unit-linked Non-Participating Individual Life Savings Insurance Plan (UIN: 116L207V01), Bajaj Allianz Life Goal Based Saving III - A Unit-linked Non-Participating Individual Life Savings Insurance Plan (UIN:116L206V01) and Bajaj Allianz Life Smart Wealth Goal V - A Unit-linked Non-Participating Individual Life Savings Insurance Plan (UIN: 116L201V01)

In addition to the already existing funds, Nifty 500 Multicap Momentum Quality 50 Index Fund is now available with the above mentioned products. Customer has an option to choose from other available funds apart from Nifty 500 Multicap Momentum Quality 50 Index Fund.

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I hereby authorize Bajaj Allianz Life Insurance Co. Ltd. to call me on the contact number made available by me on the website with a specific request to call back. I further declare that, irrespective of my contact number being registered on National Customer Preference Register (NCPR) or on National Do Not Call Registry (NDNC), any Call made, including via Voice over Internet Protocol & WhatsApp, SMS or WhatsApp messages, in response to my request shall not be construed as an Unsolicited Commercial Communication even though the content of the call may be for the purposes of explaining various insurance products and services or solicitation and procurement of insurance business

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