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    What Is A Child Plan?

    Child plans in India

    What Is A Child Plan?


    June 25, 2020

    By : Bajaj Allianz Life

    As a parent, one of the greatest joys of life is watching your children grow up into fine young people. Along with these joys, there is also the responsibility of ensuring that your children have all the resources necessary to grow into smart and responsible people. In order to ensure that your children get the best of everything, right from good education to the financial support they need to pursue their dreams early in life. You, as parents, need to plan your finances smartly from early on to ensure your child’s life goals are met.

    Financial planning is an essential part of good parenting, because it helps your money grow sufficiently over the years, so you can take care of the major expenses in your child’s life. If you start planning early enough in life, by parking some money in child investment plans, you can ensure that you are on track to reach your child’s life goals. A child insurance plan is one of the essential investment options to consider as part of your financial planning.

    If you’re unsure about how this works, it’s good to start at the basics and understand what a child plan is, so you can plan your investments accordingly and save up for your children’s future life goals.


    What is a child plan?


    In simple terms, a child plan is an insurance-investment plan that helps you save money and create wealth in order to pay for the important milestones in your child’s life. These plans are structured in such a way that you get a lump sum amount or periodic payments after a certain amount of time. By purchasing your child investment plans at the right time, you can ensure that your plan matures around the time your child makes the transition to college or attains marriageable age.

    Education and marriage are generally two important milestones in a child’s life. Choosing child investment-insurance plans smartly and including them in your portfolio can help you accomplish these life goals without any financial distress. Additionally, if your child has dreams of starting their own venture or fulfilling different milestones of their own, the returns from your child plan can prove to be very beneficial.


    What are the types of child plans available?


    There are many types of child investment-insurance plans available in the Indian financial market. Depending on the insurer or financial service provider and the kind of benefits and features you are looking for, you can choose the child plan that will help you meet your life goals as per the timeline you have in mind. Among the types of child plans in India, there are mainly two categories, namely child ULIP plans and child savings plans. Let us look at these plans in more detail.

    1. Child ULIP plans

    Child ULIP plans are investment-insurance products that provide market-linked returns. These plans offer you benefits on two fronts. Firstly, they provide a life cover that helps protect the future of your child and your spouse in the event of your unfortunate and untimely demise. Secondly, child ULIP plans also include an investment component wherein the premium you pay is invested in market-linked instruments.

    Benefits of investing in child ULIP plans

    There are many benefits that child ULIP plans offer. Some of these are listed here.

    • With child ULIP plans, you can select the kind of funds you wish to invest in. For instance, if you are risk-averse, you could opt for debt-oriented funds in your portfolio. If you were in a position to take greater risks for higher rewards, equity-oriented funds would be ideal.

    • These child investment plans also give you tax benefits under section 80C of the Income Tax Act, 1961, as per which the premiums qualify for a deduction up to Rs. 1,50,000. Furthermore, the returns obtained from child ULIP plans are also tax-free according to section 10(10D) of the Income Tax Act, 1961. Tax benefits are subject to changes in tax laws.

    • Child ULIP plans are also moderately liquid, since they have a lock-in period of 5 years. If you find yourself in any financial emergency after this lock-in period, you can partially or completely withdraw some funds to meet your needs.

    2. Child savings plans

    These investment products are essentially child insurance plans or endowment plans that provide a life cover as well as a savings component. Your investment is parked in low-risk debt instruments like fixed deposits and government bonds. Over the course of the policy period, these investments grow at a stable and steady rate. At the end of the policy term, you earn guaranteed as well as non-guaranteed returns from this non-linked child plan in the form of maturity benefits.

    Benefits of investing in child savings plans

    Child savings plans are also very advantageous investment options for parents looking to cement their child’s future. The benefits are explained below.

    • Since these plans are non-linked products, there is much less risk involved here. As a result, parents who are risk-averse can invest in child savings policies to minimize their exposure to market fluctuations without compromising on their investments.

    • These plans, also being child insurance plans, offer you a life cover that can prove to be useful if you pass away before the policy period ends. If you survive this period, you and your child enjoy maturity benefits, so your premiums are always put to good use.

    • Child savings plans also offer tax benefits for the premium paid under section 80C of the Income Tax Act 1961. Additionally, the benefits or returns obtained are exempt from tax as per section 10(10D) of the Income Tax Act 1961. Tax benefits are subject to changes in tax laws.




    Before investing in a child plan, it is advisable to get a clearer picture of the life goals you wish to save up for. This helps you identify the amount of corpus you need to create in order to fulfil your responsibilities towards your children. You also need to take into account the aspect of inflation, since most child plans are long-term investments. Having factored in these important elements, you will be in a better place to make a more informed decision about the kind of plan to choose to secure your child’s future. You could also get in touch with your Insurance Consultant/Advisor for tailor-made solutions basis your life stage, needs & goals.

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