Child Plan

When you buy a child plan, you are building a strong future for your child. A child plan is a perfect investment to fulfill your child’s future needs. A child plan will ensure the financial security of a child in case of any unfortunate event of the demise of the child’s parents. With the help of a child plan, one can build a secure financial future for one’s child. These plans are available in different variants and you can choose the best one for your child according to your needs.  These child plans can help your child in their life journeys like education and marriage. In this article, you will know about the important aspects of a child plan and how you can choose the best child plan for yourself.

What is Child Education Plan?

As the name suggests, A child education plan can help your child follow their academic dreams without hesitation. They can follow their dreams without any worries or financial burdens. The Child Education Plan comes with add-on riders and life coverage. You can also save money on premiums with these plans. You get a lump sum amount after the policy matures and helps you and your child sail through the rough financial situation. There are different types of child education plan that can meet your requirements.

How does a Child Plan Work?

When a person opts for a child plan, he must pay premiums to keep the plan active.  The premiums of a child plan are paid at a definite time. after the completion of the specified period, the plan holder receives a lump sum amount. It means that a child plan offers you a maturity benefit. This money can be used to cover large expenses like marriage or the education of your child.  In case anything happens to the policyholder during the active term of the child plan, the entire amount is paid to the nominee who will be a responsible guardian of your child after you. The remaining premiums are waived off by the insurer who ensures the financial security of your child.

Top child Plans in India

We have mentioned the top child plan available in India for the year 2021-22

Key features of Child Plan in India

There are many key features of the Child plan in India. Some of these key features are mentioned ahead-

Waiver of Premium

In case of any unfortunate events, the child plan offers an in-built waiver of premiums. It is applicable in case the parents of the child die. This key feature of a child plan depends on the policy provider.

Sum Assured

Mostly the sum assured under a child plan is around 10 times the total earning of the scheme holder. This amount is paid to the nominee in case of the demise of the policyholder or after the completion of the maturity period.

Partial Withdrawal

The scheme holder also has the facility to make a partial withdrawal in case of any financial emergency or when the child reaches the full age (18 years).

Choice of Funds

A child plan offers you unlimited options of funds to invest in. You can choose from debt, equity, hybrid, or money market funds to meet your needs. You can also switch between your fund choice after the completion of a certain period.

High Returns

Child plans are ideal for building a future financial backup for your kids. These plans offer high returns on the completion of maturity and they can go as high as 12%. It is an ideal return rate and is significant in long run. Therefore, your investment does not erode due to inflation and you can grow your funds significantly.

Tax Benefits

Child plans also come under the EEE exemption. It means that your premiums paid, the interest rate earned, and the final earning are tax exempted.

Benefits of Child Plan in India

There are many benefits of a child plan. These plans also come with unique features and perks. Child plans also offer comprehensive benefits after the completion of the maturity period. Some of the benefits of these child plans are mentioned ahead-

Build fund for Child’s Education

With the help of a child, you can save enough for the future of your child. These plans help you build financial security for your child. Before buying a child plan, you should check if that plan is meeting your future requirements. The maturity benefits of these children depend on the plan and tenure and premiums.

Financial Backup for Medical Treatment of the Child

Most of the child plans allow the policyholder to withdraw money for medical emergencies.  It can come in handy in case your child has to get medical treatment. You can withdraw the money for any health condition, minor accident, or ailment. One can gain extra protection with the help of a child plan.

Protect your Child after you 

Child plans come with a premium waiver facility for the children who lose their parents. This is appliable when the child’s plan is still active. The premium cost is borne by the insurance provider. When the maturity period of these plans completes, the child becomes eligible to get the lump sum amount according to their child’s plan.

Income Protection

Some child savings plans also offer the children an income on regular basis. The income offered is around 1% of the assured sum under the child plan. This is only applicable to the conditions where the child has lost his/her parents.

Collateral for Loans 

It is important for your kid to get a quality education.  A child plan can help your kid get a quality education even after you. A child plan can be used as collateral if you plan to take an education loan in the future. One can also borrow for other purposes under a child plan.

Accidental Death/ Disability Benefit 

Some child plans also offer the policyholder disability benefit and accidental death coverage. One can also opt for critical illness coverage under a child plan.

Child Plan: Types 

Everyone has different needs in terms of child plans or any other insurance plan. You can buy a child plan according to your future and investment goals. We have mentioned some of the child plans for you to understand-

Single-Premium Child Plan

Single- premium child plan means that the policy buyer must submit a lump sum amount at the beginning of the plan without worrying about the premiums dates. You do not have to worry about managing your budget to pay your premiums anymore. Some child plan providers also offer discounts and low premium rates on child plans.

Regular Premium Child Plan

Those who can not afford a single premium child plan can opt for this insurance plan.  Unlike depositing a lump sum amount, you have the flexibility to pay a premium on a regular basis.  You can opt to pay your premium on a monthly or annual basis.

Child ULIP

Child ULIP plans come with three integrated benefits.  It also offers high insurance coverage to the policyholder. You can also invest in the equity market and make a disciplined investment with these child plans.  In case of an unfortunate event, these child plans provide the facility of a nominee who receives the assured amount after you.  After the completion of the maturity period, the assured amount is paid to the scheme holder.

Child Endowment plans

These child plans are like traditional life insurance that offer the facility of savings and financial security. You can save a significant amount of money over time and get the lump sum amount after the completion of the maturity period. These types of child plans will help your child to get financial aid in times of need. You also get the option to make an investment into debt funds under these plans. Additional benefits are also offered at the time of maturity returns.

Why is it important to have a child plan?

The child plan can help your child pursue his dream career irrespective of the cost.  Therefore, it is important to be well prepared to support your child financially in the future.

Financial protection

With the help of the best child plan, you can prepare your child for any financial needs in the future. In case of the sudden demise of the parents, the child is eligible to receive a lump sum amount to pay any debt or to fulfill other financial needs. The lump-sum amount offered under it is tax-free. 

Counter Inflation

The cost rise of education in India has made it important for the parents to plan. If you want your child to receive a quality education, you can buy a child plan to meet all the future requirements. Good financial planning means a secure financial future. With the rising inflation in education and other services, it is important to save for the future when you can.

Rising Tuition costs in foreign countries

The most important thing you can gift your child is a child plan that can ensure him a quality education. The tuition fee in foreign countries is on the rise. It has made it difficult for middle-class families to achieve quality education. Investing in a child plan that can offer your kid a chance to study abroad can help you in lightening your financial burden.

Continued investment after the demise of parents

You can choose a child education plan that not only offers a lump sum amount at the time of death but also the investment facility to the child by the insurance provider. The waiver of premium can help you get the best investment plan for your child.

High returns on Investment

Child plans will help you build a financial fund for your child in a long run. You can opt for a child investment plan with higher returns. You also need to check if compounding is also offered to your investments.

Things to consider before you buy a child plan

Before buying a child plan, you should consider some important factors. It is a long-term investment that is why you need to be careful about what you buy-

Essential Features

Before buying a child plan, check for all the important features offered by your plan and policy provider. You can check the add-on riders and essential features to give your child financial security.

Claim Settlement Ratio

Before buying a child plan, make sure to check the claim settlement ratio of your insurance provider. Always choose a company that has a high claim settlement ratio to avoid any future troubles.

Plan Tenure

Make sure you decide the tenure of your child’s plan carefully.  You should keep in mind all the necessary factors to provide your child with the best financial backup at the right age. For example, if your child is still young, you have enough time to prepare for their future studies like 10 or 15 years.

Fund Allocation

While choosing a fund, consider the age of your child. You should also keep in mind all the necessary facilities like education, healthcare, wedding, etc. The insurance providers offer different types of fund options to avoid high-risk factors. You can also invest your money in debt funds or equity to get higher returns.

What are the add-on riders on a Child Plan?

Different insurance providers offer different add-on riders on their child plans. Some of these child plans add on riders are mentioned below-

Child Term Rider

Child term riders offer death benefits to the scheme holder in case of the sudden demise of the scheme holder before a specified age. However, after the child reaches the full age, the child plan can be converted to a permanent insurance plan offering five times the assured amount without any medical check-up.

Disability Benefit/ Accidental Death 

Disability benefits are offered to the insurance holder in case of an accident or unfortunate event that left the insured disabled or dead.

Critical Illness Rider

Critical illness rider is also offered by some of the insurance providers with child plans.  This coverage provides cost coverage against predetermined illnesses.

Premium Waiver 

The facility of premium waiver is offered by the insurance company in case of the sudden death of the policyholder.

Death of the parent 

The child plan also covers the death or disability of the parent. These conditions are mentioned in the child plan. 

Documents required to buy a Child plan 

We have mentioned the list of documents that are required to buy a child plan- 

• Proof of Age- Birth Certificate/ Passport/10 or 12 class Mark sheet
• Proof of Identity- Aadhaar card, PAN Card, Passport, Voter ID
• Proof of Income
• Proof of Address- The electricity bill, Telephone bill, Passport, Driving License, Ration card,
• Proposal Form

How much should you invest in a child plan

One of the biggest confusions, when we talk about a child plan, is what is the best plan for our child and how much do we need to invest in it. If you want to purchase the right plan for yourself, you should understand your future education expenses. The education inflation is rising significantly around 10-12% every year. For instance, an engineering course of four years is covered under INR 7-8 Lakh.  In the future, this cost tends to rise significantly.

You need to prepare enough financial resources to cover these expenses. Normally building a financial fund of INR 1 crore may look impossible but it is important to meet your future requirements. You can choose a SIP plan for your policy tenure at the 15% rate/year.  Most of the child plans also have compounding benefits on their long-term investment.

Exclusion of child plan

There are a few things that are not covered by most of the child plans in India.  The insurance provider does not provide coverage to the child in case of specified circumstances. These conditions are called child plan exclusion.

Excessive Alcohol and Drug addiction: In case a person practices unhealthy lifestyle practices like drugs or alcohol, the child plans do not offer any coverage. 

Suicide and self-harm: In case the policyholder harms himself within one year of buying the policy then the beneficiary does not get any amount. 

Risky Sports/ Adventurous activities: If a person dies during a risky venture like rock-climbing, skydiving, racing, etc then the claims made by the beneficiary are not entertained.

Criminal Activities: if the policyholder is involved in any illegal or illegal activities, the demise due to specified reasons will not be covered under the child plan.

Child Insurance Plan: Claim Process

The claim process under the child plan is mentioned ahead-

• You should always buy a child insurance plan from those insurance providers who have a higher claim settlement ratio. 
• Having trust in your insurance provider is important and it will help you make the claim process trouble-free and smooth.
• You need to notify your insurance provider first when you want to file a claim.  You need to inform your insurance provider as soon as possible. You can send an online mail or call them or visit them at their office.
• You need to duly fill the claim form. You will be asked to provide every information in detail like the nominee’s name, incident time, and date. 
• After filing your claim, you need to submit all the required documents alongside the report. 
• After the verification of the facts, you will receive the claimed amount within a month.

Child Insurance Plan Claim Process:  Documents 

You need to furnish the following documents while making claims-

1. Policy document
2. Duly filled claim form
3. Death certificate
4. Medical certificate
5. FIR copy (unnatural death)
6. Diagnostic reports
7. Post-mortem report (unnatural death)
8. NEFT details
9. KYC of the policyholder/nominee

Child Plan – FAQs 

Q1. Why is buying a child plan important?

Ans. Having a child plan ensures the financial stability of your child even when you are not around. It will help your child what he wants and aid him in big life decisions like career and marriage.

Q2. What makes child insurance plans so unique?

Ans. When a person opts for a child insurance plan, he/she gets a comprehensive package.  A child plan offers the policyholder life coverage alongside the maturity benefits.  With the help of a child plan, you do not have to worry about fund shortage.

Q3. Is it really necessary to buy an insurance policy?

Ans. Yes, for those parents who want to give their child a bright future and quality education, it is important to have a child plan insurance.

Q4. What is the entry age for the child investment plans?

Ans. For child investment plans, there is no specified age to start your investment in a child plan. However, a parent must be 18 years old while buying a child plan.

Q5. Can the scheme holder nominate a minor as a beneficiary?

Ans. Yes, a minor can be nominated as a beneficiary. However, you will have to appoint a person to receive the benefits on behalf of your child.