Child Plans

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  • What is a child insurance plan

    Insurance plan for children is one of the important aspects of financial planning for your little ones’ future. You may have started saving for their education and growing up needs. Insurance plans provide a strong support and guarantee to the investments you make for them.

    Insurance helps you to meet the expenses in each stage of their lives and have the required funds ready for each of their needs. Even in the event of the untimely death of an earning parent, the future of children can be secured with a child insurance plan, which provides a financial cover for their life.

    There are a plethora of child insurance plans in India. Each one has unique features that address a specific need in the lives of children at various milestones all through their development years.

    Child education plans

    The most popular insurance plans are child education plans, which provide financial assistance to the educational needs of the children. A wide range of education plans are available for each stage of their studies like school, college, higher education, and many more. These plans help the parents meet the various aspects of their children’s education such as fees, cost of books, accommodation, travel expenses, etc.

    Educational expenses are not uniform throughout a child’s studying years. For example, tuition fees can be really high in professional courses as compared to regular graduate or post graduate programmes. Likewise, overseas education expenses vary from country to country and from course to course. In order to meet the higher costs of education, many education plans offer customized payouts. In the unfortunate incident of an early demise of the parent, the child is protected by the education plans that provide continued financial support even when the parent is not around. Moreover, future premiums are usually waived to ensure that the parents’ dream of their children’s education is taken care of.

    Girl child plans

    Some child insurance plans are designed exclusively for the girl child. These plans mostly address the educational needs of the girl child as well as the financial requirements at the time of her marriage. In a country where the education and marriage of daughters pose a serious financial burden on most middle class families, such plans offer more stability and empowerment to girls as they grow up.

    Types of child insurance plans

    Child insurance plans differ across insurance providers in terms of features and benefits. Basically, there are two types of child insurance plans available in India – Child ULIPs and Child Endowment Plans.

    ULIPs: Unit Linked Insurance Plans are ideal for longer tenures. The funds in this plan are invested in equity instruments and the payouts when the policy matures are determined by the markets. The insured person has more control over where the money is invested, as the providers offer various investment funds to choose from. These plans offer the benefits of insurance and investment through a single policy.

    Endowment Plans: These are traditional insurance plans where the sum assured is paid on the death of the life insured or when the child attains maturity. In this option, interest accumulates over the sum assured. Periodic bonuses are offered to the insured person from the second year onwards. The pooled premiums are deposited in fixed income securities. Premiums are paid until the plan matures or for a fixed period.

    Another classification of the child insurance plans is based on how you pay the premiums. Accordingly, you can find regular premium plans and single premium plans. In regular premium plans, you pay the premiums periodically for the specified period. Single premium plans, as the name suggests, need a onetime lump sum payment at the time of purchasing the policy.

    Why should I buy chilBest features which an ideal child plan must have

    Mounting educational costs are a major concern for parents these days. On one hand, they want to give quality higher education to their children. On the other hand, they are falling short of ways to keep their children’s life financially safe and secure.

    Higher education, college fees, or marriage needs accurate planning, which is possible only through a good child plan. In India, insurance companies have launched a plethora of attractive child policies. They come with various beneficial features that the parents can adopt for complete financial security for their kids.

    Why you should have a child insurance plan

    There are various types of child policies that offer the child with the sum insured once he or she attains the age of maturity. Some other facilities are also included, which vary from policy to policy.

    Parents generally start planning for their children 10 to 20 years before the children attain the maturity age. Some of these policies offer a moneyback at certain ages when the children require the amount most. With a little bit of planning and research, you can find the most appropriate child’s plan for your kid.

    Features of an ideal child plan

    Different child plan comes with different features, but an ideal one should look at the essential needs of a child, i.e. the educational expenses that bothers the parents at different points of time. So, an ideal child policy should contain the following essential aspects:
    • In a child policy, the parent signs the application as the investor and the child remains the beneficiary who gets the final payment after becoming an adult.
    • Part payments of sum assured in regular intervals, like the 1st payment 5 years before the date of maturity, 2nd payment after 4 years before the date of maturity, and so on. Each year, the payable amounts need to be mentioned as a percentage of the sum assured.
    • A lump sum amount including the guaranteed amount and accrued bonus at the end of the term is paid. This is the final payment that contains rest of the sum assured with the above-stated benefits.
    • Insurance coverage provided is for the parent, who is the earning member of the family (the policyholder). In case of death of the parent, the company will continue further premium payments or the sum assured will be paid to the child.
    • Waiver of premium option lets the policy to continue with all benefits even after the death of the parent. So, if the waiver of premium is active, the insurance amount will be paid to the family right after the death of the parent and the moneybacks will remain intact along with the final money back amount.
    • In an ideal child policy, the arrangement of periodical payments will be such that the parent could get the payments at the right intervals, when they have to make higher expenses in form of admission fees, college fees, purchase of books, or any kinds of study related expenses. The purpose of a child policy should be to keep the basic expenses of a child covered. Any policy, which can do so, can be considered as an ideal child insurance policy.

    Top 10 online child insurance plans in India

    Child insurance plans are popular financial instruments that can safeguard the financial future of the child as they accumulate returns for future needs. With their protective offering of life insurance for the parent and periodic payouts at various times, parents are opting for child plans from the day their child is born.

    With many insurers offering both traditional endowment child plans along with unit linked ones, it can sometimes get difficult for the parents to choose the ideal child plan for their need.

    Here is a comparison of 10 well known and popular child insurance plans including both unit linked and traditional plans.

    1: AEGON Life Rising Star Child Insurance Plan

    Aegon Life Rising Star Child Insurance Plan is a ULIP child plan offering maturity and death benefits. The plan can be opted with a minimum annualized premium of Rs. 20,000 with a partial withdrawal facility. Policyholders have the option to auto rebalance their funds between equity and debt as per their risks and financial plans to make for optimum investment returns.

    2: LIC New Children's Money Back Plan

    LIC New Children's Money Back Plan is a popular non linked plan designed exclusively to cater for needs like marriage and higher education of the child. The policy offers assured returns to the tune of 20% of the Sum Assured when the child completes 18, 20 and 22 years of age respectively. At the time of maturity the LIC New Children’s Money Back Plan pays out the Sum Assured which is 40% of the basic sum assured along with simple reversionary bonuses and final additional bonuses.

    3: SBI Life Smart Scholar child plan

    SBI Life Smart Scholar is a unit linked insurance plan that is tailor made to safeguard the financial future needs of your child. The plan gives the policyholder to choose investment in seven fund options allowing for maximum possible returns from equity linked investments. The plan also allows for periodic loyalty additions on completion of specific durations. Partial withdrawal facilities are also available from the 6th policy year onwards to ensure the child's financial needs are always taken care of.

    4: PNB Metlife College Plan

    PNB Metlife College Plan is a traditional child plan helping you plan for the future financial needs of your child. The plan pays out an assured amount of 20% of the Base Sum Assured in the last three years of the policy. With a Death Sum Assured plus any accrued bonuses paid immediately in the event of demise of policyholder parnet, PNB MetLife College Plan makes sure that financial crunch is never an issue in the growing up years of a child.

    5: HDFC Life YoungStar Udaan Child Plan

    HDFC Life YoungStar Udaan child plan is a popular endowment child plan offering assured payouts in the last 5 policy years. With a policy term ranging from 15 to 25 years, the plan is suited for parents looking for both medium to long term investment options for the child's financial future needs.

    6: Bajaj Allianz Lifelong Assure Child Plan

    If taking risks with a ULIP plan is not suited for your needs look no further than the Bajaj Allianz Young Assure child plan as traditional savings insurance plan. The plan offers assured maturity benefit along with guaranteed additions and bonuses with a guaranteed maturity benefit of Rs. 1 Lakhs. The premium payment frequency is also quite flexible with options to pay yearly, half yearly, quarterly or monthly.

    7: LIC Jeevan Tarun Plan

    LIC Jeevan Tarun is a popular child plan tailor made to take care of financial needs of a child in the growing up years. The plan offers benefits between the age of 20 to 24 years and maturity benefits in the last policy year at 25 years. The minimum sum assured is fixed at Rs. 75,000 with minimum entry age at 90 days making it popular with newly born children.

    8: Kotak HeadStart Child Assured Plan

    Kotak HeadStart child assured plan is a unit linked child plan offering a basic sum assured of 10 x annualized premium or 0.5 x policy term x annualized premium for policyholders below 45 years of age. With a policy term of 10, 15 and 25 years Kotak HeadStart child assured plan is suited for all investment options including medium and long term investment plans for the child's future needs.

    9: Star Union Dai-ichi Life Bright Child Plan

    If you are looking for an endowment child plan, Star Union Dai-ichi Life Bright Child Plan is a popular option. With minimum entry age at 19 to 45 years for the parent and 0 to 8 years for the child, the Star Union Dai-ichi Life Bright Child Plan offers a minimum sum assured of Rs. 5 Lakhs and a maximum of Rs. 5 Crores.

    10: Tata AIA Life Insurance Super Achiever Plan

    Tata AIA Life Insurance Super Achiever is a unit linked child insurance plan offering assured maturity additions at the end of the policy term. A unique feature of the plan is the option to choose from any of the 8 fund options to ensure substantial investment opportunities. The minimum premium payable is capped at Rs. 24,000 per annum with a 10 year of premium payment tenure.

    Child insurance plans at a glance

    Child plan Entry Age Min Sum Assured Policy term Min Annual premium Premium Payment Frequency Premium Payment Term
    AEGON Life Rising Star Child Insurance Plan Life assured parent: 18-45 yearsChild (nominee): 1 day to 15 years Higher of 10 times of Regular Annualized Premium or (0.5 x Policy Term x Annualized Premium) 25 years less age at entry of the child Annual mode: Rs. 20,000 Other modes: Rs. 30,000 Yearly, Half-yearly, Monthly Equal to policy term
    LIC New Children's Money Back Plan 0 years to 12 years Rs. 100,000 25 years less age at entry of the child -- Yearly, Half-yearly, Quarterly, Monthly Equal to policy term
    SBI Life Smart Scholar child plan Parents: 18 to 57 years Child: 0 to 17 years Higher of 10 times of Regular Annualized Premium or (0.5 x Policy Term x Annualized Premium) 8 years to 25 years -- Yearly, Half-yearly, Quarterly, Monthly Equal to policy term
    PNB MetLife College Plan 20-45 years Rs. 2,12,040 12 – 24 years Annual Mode : Rs.18,000, Non Annual Mode: Rs.30,000 Regular Equal to policy term
    HDFC Life YoungStar Udaan Child Plan 18-55 years -- 15-25 years -- Yearly, Half-yearly, Quarterly, Monthly 7, 10 or Policy Term minus 5 years
    Bajaj Allianz Lifelong Assure Child Plan 10-55 years Rs. 100,000 100-age at entry -- Yearly, Half-yearly, Quarterly, Monthly 10, 15 and 20 years
    LIC Jeevan Tarun Plan 90 days – 12 years Rs. 75,000 25 years less age at entry of the child -- Yearly, Half-yearly, Quarterly, Monthly 20 years less age at entry of the child
    Kotak HeadStart Child Assured Plan 18-60 years Entry age of below 45: Higher of 10 x annualized premium OR 0.5 x policy term x annualized premium Entry age of 45 and above: Higher of 7 x annualized premium OR 0.25 x policy term x annualized premium 10, 15 and 25 years Regular and 10 PPT: Yearly – Rs. 20,000 p.a. and Half-yearly –Rs. 10,000 5 PPT: Yearly – Rs. 50,000 p.a. and Half-yearly –Rs. 25,000 Yearly, Half-yearly 10, 15 and 25 years
    Star Union Dai-ichi Life Bright Child Plan Life Assured: 19-45 years Child: 0-8 years Rs. 500,000 24 minus age of child at entry -- Yearly, Half-yearly, Quarterly, Monthly 18 minus age of child at entry, or Fixed 10 years
    Tata AIA Life Insurance Super Achiever Plan Life Assured: 25-50 years Child: 0-17 years 10 x Annualized Premium 10-20 years Rs.24,000 per annum Yearly, Half-yearly and monthly 10 years

    what is the difference between an investment plan and Child plan

    There is always more than one way to solve a problem. Securing your child’s future is no different.

    You can choose an investment plan to ensure sufficient funds are available for your child’s education and career needs as and when they arise. Or, you can purchase a child plan and spare yourself the trouble of tracking how your investments are growing. You can rest assured under a child plan that funds will be available by the time your child gets on his feet or gets ready for college.

    This article compares both these plans on various parameters to highlight their differences and help make a choice.

    Insurance component

    Most child plans insure you against death so that the child’s future is not jeopardized financially. In case of untimely death, the education or career of the child is taken care of by the sum assured, which goes to the nominee. This, however, is not a rule.

    There are also certain child education plans that do not have an insurance component but focus on guaranteeing a return upon maturity. This return, or the sum assured, can be paid as a lump sum, or periodically as chosen by the buyer at the time of buying. Generally, people buy these plans for a period extending up to the time when their child turns 18 or is ready for college.

    Investment plans, on the other hand, do not have the insurance component. You choose an investment route, which can be mutual funds, SIP in mid cap, PPF, RD or plans like Sukanya Samriddhi Yojana, and see your funds grow. Barring cataclysmic periods, these options can give you enough return to meet the financial needs of your child’s future education.

    Return on Investment (ROI)

    The sum assured in a child plan is considerably lower than the average return you can expect from a similar investment in pure investment plans mentioned above. ROI for the average child plan falls in the bracket of 4-5%. This is much lower than the investment options discussed earlier, which can give returns upward of 12% in the long run. The presence of an insurance component increases the cost of child plans which in turn inflates the premium. While the assured returns may be just enough to meet your child’s College expenses, you might fall short to meet the expenses of higher studies. Another important consideration is Inflation. In particular, inflation in education expenses has spiraled in recent times. Fees of IIMs and IITs have increased manifold under a decade. In the times to come, higher studies will likely get even costlier. You must take this into account in estimating the funds that will be needed when your child goes for higher studies.

    Risk Factor

    Pure investment plans have varying levels of risk depending upon the instrument in which funds are parked. If the greater portion of your investment is in small cap funds, stocks, or equities, there is a greater amount of risk involved. On the contrary, if the major part of your funds is invested in low-risk debt instruments, you are relatively safe. Returns also depend upon whether your funds are well diversified, or you have put all your eggs in a few baskets, which is a risky proposition.

    Child Plans eliminate the factor of risk altogether for the buyer. The burden of risk is borne by the insurance company and the buyer is assured of the return promised. Generally, most people have a low risk appetite when the matter concerns their child.

    While it may be a pragmatic approach to go the investment route for capital appreciation over a long period of time, the element of risk is always there. For those who start early, an investment route is not a bad option considering the power of compounding of interests, which can considerably increase the sum upon maturity.

  • Q: What is a child plan?

    Q: Why should one consider opting for a child plan?

    Q: What is the right time to seek a child plan?

    Q: Can a child plan be bought the minute the child is born?

    Q: Who can buy a child plan?

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