As a parent, it is important to have proper financial planning in place in order to provide a safe future for your children. These arrangements help children to get financial support during the journey of attaining important milestones in life like Higher education. Child plans, a type of life insurance, play a significant role in helping parents fulfill this responsibility.
What is a child Insurance plan?
A child insurance plan is a combination of insurance and a savings plan that ensures6 a secure future for your child. Life cover is available as a lump sum amount at the end of the policy term. child plans also provide flexible payouts that help to achieve your child’s goal.
In case of an unseen event with the policyholder during the policy term, the company offers your nominee the life cover amount. The company also waives the future premium for the remaining policy term and the premium paid by the insurance company to ensure that your children’s future is secure.
How does a child insurance plan work?
Let’s consider the example to understand how child insurance plans work to secure the future of your children.
Mr. Sharma has taken a child plan, a 10-year insurance policy for his child. Now he will have to pay a premium amount monthly, half-yearly, or yearly depending on his selection of premium mode. In the case of Mr. Sharma’s death in the 5th year of the policy, his nominee will still receive the entire life cover amount. In case Mr. Sharma survives the policy tenure, he may choose to use the amount in parts for important milestones of his child’s educational journey, or he may choose to get a lump sum amount also called maturity benefits at the end of the Policy term.
Why should you buy a Child Insurance Plan?
- Save for child’s education
- Insurance Coverage
- Better return on investment
- Loans & Partial withdrawals
- Tax Benefits
Save For Child’s education: The right time to save for children’s future is when they are still young. It gives enough time to build a decent amount to fund their college, higher education, and marriage events. Child insurance plans come with both investment and insurance coverage, so even if parents are not alive, their children will continue to reach their goals.
Insurance Coverage: For a parent, the biggest fear while planning for their children’s future is the uncertainty of their own life. The question is always constant in mind “what might happen with their kids after their demise or in the event of an accident, disability and critical illness, etc.” Child insurance plans help to avoid this fear as these policies come with insurance coverage that should minimize the risk to the life of the parents ensuring that their children’s education and future are not affected.
Better return on investment: There are different types of child insurance plans available in the market, and each follows a unique strategy to maximize the returns through dynamic and balanced equity-debt allocations.
Loans & Partial withdrawals: While making any investment, it is natural to come across emergencies requiring partial withdrawal. A child insurance policy allows partial withdrawals to plan for unexpected events.
Tax Benefits: The child insurance Policy provides income tax benefits on the premiums you pay for the policy, up to Rs. 1.5 lakhs for deduction under section 80C of the Income Tax Act.
Key Features and benefits of Child insurance plans
Waiver of Premium:
The child plan has an in-built premium waiver, which is applicable when the parent’s death. This feature may be different from insurer to insurer.
This is the lump sum that your child will receive in case of an unforeseen event. You should select the lump sum based on the amount they will need to complete their education and live without any financial limitations.
Everyone experiences an emergency situation at some point in life. A partial withdrawal clause shields you against emergencies when you need money immediately. If you have opted for a partial withdrawal clause, you can withdraw a part of the money from the sum invested in the child plan to meet the emergency expenses.
Choice of Funds:
A child insurance plan such as a ULIP policy allows a policyholder to select the choice of investment funds like equity, debt, hybrid and money market.
The return of Child insurance plans goes high, Which is above then our inflation
The flexibility of premium payment:
Insurance holders can choose the frequency of premium payments as per their needs like monthly, quarterly, half-yearly, or yearly.
By taking life insurance at an early age, you can a get tax deduction on your income for a longer period under section 80C of the Income Tax Act, 19
- Accidental Death Rider
- Critical Illness Rider
- Total And Permanent Disability Rider
- Child Support Benefit
- Waiver of Premiums Rider
Best Child Plans
Types of Child plans available in Market
Single-Premium Insurance Plan
Single-Premium Child Plan requires a one-time investment, which is also subjected to discounts and other benefits.
Regular Premium Insurance Plan
Regular-Premium Plan requires you to pay the premium at prefixed intervals. The frequency of premium payments may be monthly, quarterly, half-yearly, or yearly.
Child Endowment Plan
In choosing a Child Endowment Plan, you authorize your insurance provider to invest in the instruments of debt. Endowments Plans provide capital appreciation, while steadily adding to the growth of the fund with returns from investments.
Unit-Linked Insurance Plan (ULIP)
ULIP plan is a combination of investment plans and life coverage. They invest the premium paid in equity instruments and debt instruments. Although the plan carries some amount of risk, it yields more returns than endowment plans in the long term. The policyholder also has the option to switch between funds after a certain waiting period
Accidental Death Rider
The rapidly growing of accidents in India makes it fear to have the protection of the accidental death rider along with the primary child insurance policy so that your child’s dreams remain secure even in your absence. While the basic child insurance plan offers the death benefit to your family, the accidental death rider will help provide extra financial coverage over and above the death benefit to your family after your death.
Critical Illness Rider
Today our changing lifestyle and food habits contribute to the increasing instances of health issues such as diabetes, stroke, cardiovascular diseases, and cancer. The medical treatment for these critical illnesses is not only consuming your time but also expensive, meaning that the treatment can drain out all savings. Having a critical illness rider with your child insurance is avail of financial relief.
Total And Permanent Disability Rider
In case you meet with an accident, which physically disability you permanently, this rider will act as a much-needed financial cushion for the future needs of your family and yourself.
Child Support Benefit
To protect your child’s future, the Child Support Benefit will provide an additional sum of money. This sum of money will be provided over and above the sum assured under the child insurance policy and help you take care of your child’s life dream
Waiver of Premiums Rider
If the Insured person suffers from a Disability and is not able to pay the Premium amount then the Policy is usually terminated. But if you have a Waiver of Premium Rider along with your policy then the future premiums are waived off yet the policy continues as normal.
The thing to Consider when you buy the Child insurance plan
Here are some key factors you should consider to understand your Child plans requirement and make the right decision while buying a Life Insurance Policy. Here are some important points to consider
1. Know your current life stage
As you grow older, you will pass through different life stages. Some of these life stages are getting your At these different life stages, you will have different Planning for these goals in advance will help you achieve them.
2. Choosing the right insurance amount: – It is most important to choose the right plan with the best premium amount. Best premium in the sense less premium with more coverage. You should not reduce your premium amount by compromising on coverage. Because, by doing this you may not get total benefit in critical situations and may have to pay a significant amount while treating a disease, hence no benefit of purchasing life insurance.
3. Claim Process: – You must check the claim process before buying a Child plan. The simpler the process, the faster you can pass your claim. So, it is better to buy a policy with a simpler claim process.
4. Claim Settlement Ratio:- This is the percentage of the total claims received during the financial year that the Child plans provider has settled.
5. The add-on riders:- Riders such as accidental death benefits, Premium waiver benefits, critical illness, Terminal illness riders, daily hospital cash benefits, Surgical care rider benefits, accidental disability riders and Income benefits are add-ons to your current Core life insurance plan, which help customize the policy according to your specific needs.
6. The type of policy:- There are various types of life insurance policies, each with its own unique advantages. You need to identify your needs and goals and choose the policy type that best meets your requirements for example If you want only insurance then you can choose Term Insurance or if you want insurance and investment then you can go for ULIPs and Endowment insurance
7. The terms and conditions of the policy:- There are other terms and conditions of a life insurance policy that you need to consider as a policyholder.
How Much Should You Invest In a Child plans
How To File A Child Plan Claim?
Get the child insurance policy from a reputed insurance company that boasts of a high claim settlement ratio. This ensures a smooth and quick claim processing and settlement in times of emergency. Let’s get acquainted with the claim process.
In case of an event for which a claim needs to be filed, inform the insurer about the incident as soon as possible. This can be done by visiting the nearest branch office or calling their toll-free number or sending an email
Also, submit the claim form and give other details like particulars of the policy, the date, and cause of the incident, the name of the nominee, etc.
Once the claim is registered, provide other supporting documents and reports
The company will appoint an assessor to verify the documents and the case
If approved, and no further investigation is needed, the claim benefit is transferred within 30 days of furnishing the documents
Documents Required for Claim Process
In order to make claims in case of any eventuality, keep the following documents in place to avoid any rejection. The documents required vary from case to case.
- Duly filled in the claim form
- Policy document
- Death certificate
- Medical certificate
- Diagnostic reports
- FIR copy (unnatural death)
- Postmortem report(unnatural death)
- KYC of insured and nominee
- NEFT details
What are the eligibility criteria to buy a child plan?
Documents Required To Buy A Child Plan
Here is the list of documents, you require to submit while buying a child’s Plans
- Salary slips for the last 6 months
- Bank statements of the last 6 months with entries of 3 months of salary credited continuously
- Income Tax Returns (ITR) for the last 2 years
- Certificate issued by CA in case the individual is self-employed
- Form 16 (Latest)
- Birth Certificate
- Aadhaar Card
- Voter ID Card
- PAN Card
- Driving Licence
- Marriage Certificate
- Ration Card
- Aadhaar Card
- PAN Card
- Voter ID Card
- Address Proof
- Aadhaar Card
- Voter ID Card
- Ration Card
- Driving License
- Passbook with 6 months of latest entries
- Bank statement of savings account
- Latest 3 months of utility bills
- Apart from KYC documents, there are a few other documents required at the time of application for the child insurance policy. Following is the list of other documents required at the time of policy application:
- Application/Proposal Form
- Policy Declaration in case the proposal form had not been filled by the life insured
- Apart from all these, some insurers may ask for some other documents according to their requirements
What does make a child plan special?
A child education plan offers a comprehensive advantage of life insurance coverage and maturity benefit. The policy provide security that ensures your child’s education is not affected due to a shortage of funds
Who is a nominee?
A nominee is an individual who is entitled to get the all benefits after death of the policyholder as decided by you during policy purchase.
What is a child education plan?
A Child Education Plan is an insurance policy that offers protection and an opportunity to save money to ensure a secure future for your child. It provides your child receives the education they desire with a lump-sum payout at maturity or when any unfortunate event occurs to you.
Why are child plans special?
A child insurance plan acts as both a good insurance and investment option. It helps an individual build a corpus for the child’s bright future during the policy duration.
What is the meaning of child life coverage?
Child life coverage is the sum assured on death offered to the nominees in the event of the policyholder’s death.
What documents do I need to buy a child insurance plan?
You will require the primary KYC documents for proof of ID and the address of yourself and the child. Additionally, you will have to submit the age proof as well.
Who should consider purchasing a child insurance plan?
If the age of your child ranges between 0-15 years old, then you must consider purchasing a child insurance plan.