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CHILD PLANS

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  • Quick and easy comparison for similar child plans
  • Expert advice before you make a decision
  • Customised plans for your child`s future
  • 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 programs. 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.

    Best 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 Money back 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 Money backs 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.

    https://www.aegonlife.com/sites/default/files/product_pdf/AL%20Rising%20Star%20Leaflet%2027-11-2015.pdf

    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.

    http://www.licindia.in/Products/Insurance-Plan/LIC-s-NEW-CHILDREN-S-MONEY-BACK-PLAN-(2)

    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.

    https://www.sbilife.co.in/en/individual-life-insurance/ulip/smart-scholar

    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.

    https://www.pnbmetlife.com/insurance-plans/child/smart-child.html#parentHorizontalTab

    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.

    https://www.hdfclife.com/children-insurance-plans/youngstar-udaan

    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.

    https://www.bajajallianzlife.com/child-plans/young-assure.jsp

    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.

    http://www.licindia.in/Products/Insurance-Plan/jeevan-tarun/Eligibilty-condition.aspx

    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.

    http://insurance.kotak.com/individual/child/head-start-child-assure-eligibility.php#tabs

    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.

    https://ww.sudlife.in/insurance-plans/life-insurance/child-plans/bright-child

    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.

    http://www.tataaia.com/life-insurance-plans/child-plans/super-achiever.html

    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.

    Eligibilities for having a child plan
    A child plan is basically meant for securing the future of one’s child in case the earning parent(s) meet(s) with an unfortunate incident. There are various types of child plans and the eligibility criteria for each type is different.

    The Various types of child plans are:

    ULIP Child Plan
    Single Premium Child Plans
    Endowment Child Plans

    The types of eligibility would vary depending on whether the parent or the child is the policyholder or the Life Insured.

    Child plans where parent is the life insured

    Generally, in most child plans available, the parent is the life insured.

    The eligibility criteria for parents to avail a child plan are as follows:

    Entry age: The entry age of the parent varies for different plans from between 18 to 60 years. This means that parents between the age of 18 and 60 years can opt for this type of plan. Of course, the higher the entry age, the lesser the policy term available. Very few companies allow an entry age of 60, in which case, the maturity age is up to 75 years.

    Maximum maturity age: The maximum maturity age is the age when the plan would mature and policy ends. It varies from company to company, but generally it is between 65 to 75 years.

    Minimum annual premium: The premium amount of the policy also varies and this is a criterion for availing a child plan. Some companies do not have this condition of minimum premium, but mostly it is between Rs. 10,000 to Rs. 25,000 annually.

    Age of the child: The age of the child determines the term of the policy. Most companies have capped the same at 25 years. This means that the maximum term possible is for a newborn child and is 25 years. If the child is of higher age, the term would be 25 years minus the age of the child.

    Minimum sum assured: This also varies but normally this is 10 times the annual premium.

    Maximum sum assured: Some companies have put an upper limit on it, but if one has the income proof, then one can opt for as much sum assured as desired. Since sum assured is payable at the time of the death of the parent, their income is the criteria for deciding sum assured.

    Single premium plans: For single premium ULIPs, the other criteria are the same but the minimum sum assured is generally 1.25 times of the premium

    Entry age Usually 18 and 60 years. Up to 75 years for few plans
    Maximum maturity age 65 to 75 years
    Minimum annual premium Starts from Rs.10,000 to Rs.25,000
    Age of the child 0-18 years (rarely up to 25 years)
    Minimum sum assured Minimum 10 times of the annual premium
    Maximum sum assured No limits
    Single premium plans Minimum 1.25 times of the premium

    Plans where the child is the life assured

    They are usually in the form of money back plans. In these types of plans, the child is insured so the eligibility criteria are as based on the child. These criteria are:

    Entry age: The entry age is between 0-12 years and this decides the term of the policy.

    Minimum and maximum premium: The minimum premium varies greatly, and for maximum premium, there is no limit in most of the plans.

    Term: The term of the policy is capped at 25 years usually. This means that for a child of 8 years, the term would be 25 minus 8, which is 17 years.

    Minimum basic sum assured: This is generally Rs 1 Lakhs.

    Maximum basic sum assured: Some have capped it at Rs 1 crore, but there are many plans where you can take as much as you want.

    The main difference is who is insured. In case the parent is insured, sum assured is paid and the premiums are waived off for the term of the policy in case of an unfortunate event. The nominee gets the maturity benefit at the completion of the policy. In case the child is the life insured, sum insured is paid and the policy stops.

    5 Useful Tips to Buy Child Plan in India
    Given the uncertainties that life often presents, it is important that you prepare yourself for a secured future. One of the vital reasons to buy a child plan for your children is to ensure that their future is not jeopardized by your untimely demise.

    Investing in child plan helps you to support your child during crucial times, especially when he or she plans to pursue higher education. An ideal child plan should give you the flexibility of spacing out your pay-out so that your little one receives the maximum fund when he or she requires it. Hence, it is imperative to choose the best suited child plan based on your needs.

    Below are some tips to consider when buying a child plan.

    1) Consider the rising cost and the changing needs

    While availing a child plan, the most crucial aspect is to decide the right amount of investment. You need to understand and assess the changing needs of the new generation and factor in inflation before deciding a suitable sum assured. All that you are saving for your child would be used in shaping his future, but what costs Rs100 today might cost Rs500 when your child needs it.

    2) Look for Premium Waiver Rider

    It is advisable to invest in policies that offer premium waiver benefit – either as an option or as an essential feature of the primary plan. This waiver is important particularly in case of untimely death of the parent whereby the insurer waives off all future premiums while continuing to fund the insurance policy till maturity. This makes sure that the maturity benefit that was agreed upon for a certain age remains intact as planned, in addition to the death benefit paid.

    3) Check for flexibilities

    A plan with flexibilities is helpful and handy. Analyse the child’s need as per various life stages and accordingly opt for partial withdrawals. As per your capacity, opt for various premium payment modes, be it annually, half-yearly, or quarterly. Opt for a plan that offers a balanced mix of growth and debt funds, along with capital protection and growth.

    4) Buy it online

    Buying a child plan online is not only easy and hassle-free, but also comes cheaper. All the leading insurers have a bouquet of policies displayed on their webpages, which can be browsed through to arrive at a decision. In your busy schedule, online transaction can be done at your convenience 24/7. Online premium calculators can also give you a fair idea about fund allocation for a specific plan.

    5) Compare and buy

    Since insurance is a long term investment, in-depth research is always advisable. Online insurance broker help you shortlist and compare all the policies at one go. At times, they also pro-offer expert advice. The reviews posted by customers also give you the pros and cons of a specific plan or insurer chosen. You can compare the riders offered by various insurers before narrowing it to one. Child’s future is your responsibility—choose a child plan that encourages long term investment. A child plan provides a long horizon to invest, enabling you to methodically build a corpus over a period of time.

    What are the different types of child plans in India
    Parents wish their little ones all happiness in life, the best education that money can buy, and a decent bank balance for their secure future. A child insurance plan can ensure steady growth of dedicated corpus through regular savings and pay the sum assured when the child actually needs it. Moreover, the life coverage of the parent keeps the child financially secured in case some mishap happens to his or her parent.

    What is a child insurance plan?
    There is not much difference between a child insurance plan and other life insurance plans. A child policy is designed in such a way that the child’s most essential needs are looked into when they actually require lump sum money. So, child insurance policies can help to fulfill needs like higher education, payment of school fees, etc.

    In any of these policies, the legal guardian remains the actual policy holder and he or she pays the premium every year. The insurance company agrees to pay a definite sum assured at the end of the term. At the same time, the policy also provides the death coverage of the parent who is paying the premium on behalf of the children.

    Types of child insurance plans in India
    Different types of child insurance plans are available in India. Insurance companies have really gone innovative in this matter. However, basically, child insurance plans can be differentiated into two categories:

    • Endowment plans: These are traditional plans with a guaranteed return and an insurance coverage for the parent.
    • Child ULIPs plans: As the name suggests, the funds are invested in the equity market and the return is not fixed. Here also, the parent’s life is covered for protecting the child from any kinds of financial needs in absence of the income generator of the family.

    Look at the following table.
    Policy Types Key features Purpose of the policy
    Endowment plans
    1. Life coverage for the parent
    2. Sum assured is fixed.
    3. The bonus is paid, either reversionary or simple
    4. Terminal bonus is paid in some policies
    5. Lump sum amount is paid at the end of the term
    6. Generally, the policies mature when the child attains any age between 18-21 years
    1. Provision of a lump sum amount when the child actually needs the money
    2. Financial security for the child in the case of the unfortunate death of the parent
    Child ULIP Plans
    1. Investment of fund in the equity market
    2. Varieties of funds are available that ranges from highly aggressive to very conservative one
    3. Maturity value is subject to market return
    4. Insurance coverage to the parent
    1. Paying a lump sum for the benefit of the child when he or she actually need a good amount of money
    2. Financial security for children so that his education or other vital aspects are not ignored even if the parent dies

    Financial planning for the child is always a good idea. Long-term investments in a good child insurance policy can be more beneficial than short-term ones. Parents who can start early, i.e. when the child is 2-3 years old or even less really make the policies a true “friend in need” of their loved ones.

    How my premium is calculated while buying a child plan
    Insurance is something you buy today and get (the benefits) tomorrow. While the ‘today’ is self-explanatory, the ‘tomorrow’ is not to be taken in the literal sense.

    In child plans, this ‘tomorrow’ is paramount as this coincides with the milestones in your child’s life like college, higher studies, and marriage. Consequently, calculation of premium is a function of the time a child is away from the said milestones. That, however, is not the only factor that goes into deciding the premium you can pay.

    Here’s the complete list of criteria to note while planning investment in a child plan.

    Child’s age: As mentioned earlier, time is the most important factor in a child plan. Your child’s present age decides the length of the term of maturity.

    For example, the parents of a six-year-old child have a window of 14 years to invest, assuming the child completes graduation and wants to do an MBA at 20 years of age. The premium for child plan in this case will be lower than, say, that for a child in his teens.

    Remember that most companies that sell child plans online have their own version of premium calculators, which would require you to enter the child’s age or the number of years after which you want funds for child’s education. Some educational plans may not require the age of the child but leave the choice of term on the buyer. Naturally, one must choose a term in sync with their child’s future requirements.

    Choice of profession: Different fields of higher studies have different education costs. The tuition fees in many of the courses of preference are considerable, let alone other expenses. For example, pursuing an MBA entails a fund requirement of somewhere between 10 and 20 Lakhs at current prices.

    Depending on whether you want your child to study law or take up undergraduate courses in Engineering or Medicine, your fund requirement will vary and so will your premium.

    Inflation: Your whole plan may fall like a house of cards if you forget to take the aspect of inflation into account.

    For example, assuming the current rate of inflation for the next 15 years, the same MBA degree that costs 10-20 Lakhs today will cost more than 50 Lakhs then. Keeping a margin for inflation is therefore necessary to ensure the returns suffice for the future requirements of your child. You don’t want to dip into your savings or retirement funds to pay the balance. The inclusion of inflation naturally results in inflating the premium as well.

    Place of higher study: The most important reason people buy child plans is the cost of higher education. These are highly inflationary times, particularly in the field of education. Even a domestic MBA degree costs go up to 20 Lakhs these days. A higher degree abroad costs even more—often double or higher than what it costs at home. Your premium under a child plan may go significantly up if you plan to send your child abroad for higher studies.

    Duration of professional studies: The premium of child plan also varies according to the duration of the professional studies your child plans to go for. A short-term course will not have the same quantum of fund requirement as a long term course.

    Additional cover: Another factor that pushes up the premium of a child plan is the inclusion of rider benefits like critical illness rider or premium-waiver rider. Sometimes, these riders are very desirable. For example, the premium waiver rider, which ensures the plan continues even if the buyer dies mid-term, is a popular option for many buyers. The burden of remaining premiums is transferred to the insurer under this benefit.

    Girl child: If you have a girl child, the premium payments should be planned considering marriage expenses additionally to education expenses. This means, you have to plan investing more money.

    While these are the factors to be considered while opting for a child plan premium payment, one has to consider other important factors like diversification of investment portfolio, affordability of premiums considering your monthly income, and other financial obligations.

    What are the factors affecting my child insurance premium?
    Once you become a parent, you have a big responsibility on your shoulders to raise your child and provide him or her with a secure future. But you may not be there all the time with your child as life is uncertain. Besides, rising inflation and education makes it difficult to successfully provide for your child financially when he needs it most to pursue higher studies. Hence, you should go for a child plan that will not only provide a secure amount to your child if something happens to you, but also a maturity benefit on the completion of the term.

    However, you have to pay a cost to avail this child plan to secure your kid’s future. You need to pay premium on the child plan so that he can receive funds when he needs it the most for pursuing higher education.

    There are some factors affecting child insurance premium. Let us have a look.

    Sum assured: You can choose an amount that you think you will need to fund your child’s education or dream to pursue a particular profession. You also need to take into account the inflation rate to arrive at that particular amount. This sum assured selected will determine the premium you need to pay every year.

    Tenure of the policy: Once you have selected the sum assured to fund your child’s education, you need to then figure out the age at which your child will require those money. For example, if your child is 12 years of age now and studying in class 6, he will require the money 10 years later when he has completed his graduation and ready to pursue higher studies. And if he is 15 years now, he will require the sum assured 7 years later. Hence, the lesser the tenure of the policy, higher the premium, considering sum assured is the same in both the options.

    Type of policy chosen: The type of policy chosen will determine the cost of the premium. The premium of a child plan that offers lump sum amount at maturity will be different as compared to a plan that offers money back benefit or instalment payout to meet the needs of your child at regular intervals. Besides, there are plans that offer premium waiver on death of the policyholder. Hence, the premium on this plan might be higher when compared to a plan that does not offer add-ons.

    Frequency of paying premium: There are certain benefits of paying premium on a yearly compared to half-yearly or monthly basis. When you pay premium yearly, you pay less than on a half-yearly or monthly mode of payment.

    Riders: You may choose to take accidental death benefit or permanent disability benefit riders with your child plan to cover all the risks involved. Hence, in such a situation, the costs of the premium will be higher than just a normal child plan offering a death and maturity benefit. 

    Hence, study various insurance websites to identify an affordable premium without compromising on the sum assured you need to finance your child’s future.

    What is not included in child plan( exclusions in a child plan)
    A child plan is the best way to secure your kid’s future. With a child plan, you can provide a financial security to your child in the event of your untimely death. Post the death of policyholder in a child plan, the premium is waived off and a maturity benefit is paid to the child so that he or she can take care of higher studies.

    These child plans also come with few riders – such as accidental or disability benefit. You can also buy a child health plan to take care of the medical needs of your child.

    All this sounds good, but you may not be aware of about the insurance plan are exclusions—features that are not included in the policy.

    These are called terms and conditions, which are published in fine print. But often insurance seekers tend to read them only in passing.

    It’s important to read the exclusions carefully so that your child receives the plan benefits timely and efficiently.

    What are the exclusions in a child plan?
    Suicide of the parent: No benefit is given if the life assured commits suicide within one year of the child plan.

    Accidental death: Even if accidental death benefit or permanent disability benefit riders are taken with the insurance plan, there are certain instances when compensation is denied if accident is caused due to the following reasons:

    • Participation in riots, strikes military service
    • Influence of illegal drugs or alcohol
    • Racing or betting or illegal flying
    • Criminal or illegal act

    Critical Illness: In cases critical illness rider is not taken with the insurance plan, certain diseases may be excluded from the plan. This may vary for different insurers and will be mentioned in the policy document.

    Exclusions in child health plan

    You can buy a separate medical plan to secure your child’s health. But even in such plans, there are certain exclusions that you must note down before buying the plan.

    • An older child will be excluded from receiving compensation for treatment of a particular disease if he or she has that pre-existing disease.
    • High-risk activities such as mountaineering, life-threatening hobbies that can lead to accidents or major injuries, or hunting.
    • If there has been a deliberate failure to take medical help at the right time.
    • Diseases due to sexual misconduct.
    • Radioactive-related diseases.
    • If the facts and figures in the policy are misrepresented, compensation might be denied to the policyholder.

    Hence, it is extremely important that you compare various child plans and read what is being offered—especially what are excluded from the plan—to choose the best policy for your child in order to secure his or her future.

    Rates of Return in Child Plans
    Comparing child plans is not child’s play by any yardstick. There are a variety of products sold under the broad category of ‘child plans’ and these range from pure investment plans to insurance plans. The rates of return of these plans vary according to where the investments are actually made and what the costs covered are.

    For example, if you buy a child plan that is insurance-oriented, the returns may not be as attractive as what you can expect form a pure child investment plan. In an investment plan, part of your funds go towards the cost of life cover that is offered over and above the minimum sum assured to meet your child’s education needs at crucial stages of life.

    When it comes to child plans offered by reputed fund houses, the returns over a period of 10 years vary in the range of 8-18%. These plans are pure investment plans and the rates of return are market-influenced.

    The only deductions may be in the form of fund allocation charges and there may not be an assurance of a minimum sum as the funds have market exposure and are therefore subject to market risks. The returns under these plans may or may not be exempted from tax.

    Categories of child investment plans and their rates of return
    Depending upon the allocation of funds, these plans can be broadly divided into three categories, with each category yielding different rates of return. The following table shows the categories and the average returns over the last 10 years based on Compounded Annual Growth Rated (CAGR) basis:

    Allocation type Examples of child plans Average returns for a 10 yr period on CAGR basis
    Traditional (lowest risk) SBI Magnum, ICICI Pru child care, HDFC children gift savings plan, etc. 8%
    Diversified or balanced (medium risk) LIC Nomura, Templeton India Children Gift growth, Peerless MF child growth schemes, UTI Children Care Balanced, etc. 12-13%
    Equity funds (high risk) ICICI Pru Child Care Gift Regular, UTI CCP Average Growth, etc. 15-17%

    Traditional plans: These belong to the conservative allocation school of thought where 20% of the funds to be invested are allocated to Equity and the balanced in a mix of low to medium risk instruments like debt securities. These types of funds have historically shown the lowest yield among the three categories. Nevertheless, the returns are substantial and way better than Fixed Deposits or Savings Deposits. Returns in this case also score over what is generally returned by child insurance plans.

    Diversified or balanced plans: These are characterized by a medium exposure to equity with 50-60% allocation and are known to generate better returns than conservative funds as shown in the table above. Funds in this category have higher risk elements as a result, albeit the balanced nature of allocation provides some cushion from market volatility.

    Equity funds: These plans have been consistently delivering superior long term returns despite the risk factor being the highest due to 100% allocation to equity. There are funds in this category that have even given returns close to 25%. This category is suitable to those with a higher risk appetite. As traditional buyers don’t like taking too much risk when it concerns their child, this category of child plans is not very popular.

    A word of caution
    Also, while average returns in plans of the ‘equity’ category is highest, it also attracts higher taxes as more than 65% of fund allocation in equity is exempted from tax only if held for one year. If the ratio is not changed or the fund is not switched after that period it will attract considerable tax in the form of capital gains tax.

    A scenario
    Ashok and Anita are proud parents of 14-year-old Abhinav. Ashok had invested in a couple of child plans 10 years ago in the ratio of 2:1, i.e. two-thirds in equity funds (third category) and one-third in balanced funds (second category).

    He has built an impressive corpus already that can take care of Abhinav’s junior college and college education and even a part of his professional education needs. But now that Abhinav is nearing his junior college stage, Ashok decides to switch his funds from equity and he now invests in the same ratio 2:1 but as follows – two-thirds in diversified funds (second category) and one-third in conservative funds (first category)—thus reducing exposure of his funds to market risks.

    Nearer the 20-year-mark when Abhinav will actually start needing funds, Ashok will withdraw everything and put the entire amount in debt instruments or simply in his savings bank account.

    It is generally advised to follow a similar strategy—invest more in equity in the beginning to gain from the power of compounding and market so that your funds can grow substantially and gradually decrease the exposure to equity—while buying a child plan.

    How the maturity amount can be calculated in a child plan
    A child plan is an insurance cum investment plan that serves a vital purpose in life. It not only secures the child’s future, but finances his or her higher education and marriage. In case of your unfortunate demise, the plan creates a corpus over a period in time that will shape the future of your child. As a loving and caring parent, a suitable child plan is your responsibility and family obligation.

    As the child grows up in this fast-paced world, he would look for success through various career means initially before narrowing down to a single option. At this juncture, he would need your support and inspiration to boost his confidence to reach at his desired career destination. As a parent, you have to be his strong pillar of constant support and plan accordingly both financially and emotionally. In the journey of life, even if you are absent, you can ensure that your child doesn't miss out on opportunities due to insufficient funds. But how can you make sure that the amount you invest is sufficient for your child’s future needs? For that you need to know how the maturity amount is calculated in insurance. Let us do it with an illustration.

    Illustration

    Let’s see how Pritam, 32, a responsible father, starts investing a part of his income for his son Rohan.

    Every month Pritam invests Rs.5000 for a period of 12 years. He then gets a sum assured of Rs. 8.9 Lakhs. This pay-out will definitely help Rohan to achieve significant milestones of his career in later stages.

    When Rohan attains an age of 17 years and 19 years, just when his dreams are about to take shape, Pritam can get an approximate amount of Rs. 1.78 Lakhs from the child plan he invested in. Whereas, at the age of 21 years, he can get an approximate amount of Rs. 2.67 Lakhs to support Rohan.

    Finally, when Pritam’s son turns 23, an approximate amount of Rs. 12 Lakhs at 8% interest rate, and Rs. 4.3 Lakhs at 4% would give him the right platform to give wings to Rohan’s future.

    Depending on the child’s need, there is flexibility of pay-outs, which can also be deferred. Also, if Pritam passes away during this tenure, the policy continues and Rohan receives the amount at the time of pay-outs.

    Source: https://insurance.birlasunlife.com/our-solutions/children-future/bsli-vision-star-plan.aspx

    Calculating maturity amount
    Unlike bank accounts or fixed deposits which have a straight forward interest matrix and a few charges as deductions, maturity calculations of insurance plans are pretty complex, with a series of charges and bonuses to consider.

    Start with the offer document and note down all the applicable charges and bonuses and then the maturity can be calculated. However, charges may differ from year to year based on the insurance provider.

    A step by step calculation is illustrated below.

    Year Premium Charges Final amount Interest/Bonus Balance
    1 P1 X1 P1 - X1 Y1 (P1-X1) + Y1 = B
    2 P2 X2 P2 - X2 Y2 (P2 - X2) + B + Y2 = C

    Applying the above formula year on year, one can calculate for a desired policy term. For instance, if policy term is for 10 years, then the value that would appear in the balance column for the 10th year will be the maturity benefit. If sum of all the premiums are subtracted from maturity benefit amount, then you get your net returns.

    Interests and bonuses are generally guaranteed additions, but there may be variable additions also which cannot be predicted in advance. Hence, it’s better not to consider them while calculating the final amount.

    While buying a child plan, the steps to be followed are very simple. Firstly, select a sum assured amount, followed by assured pay-out options, and finally, premium paying term. Most of the insurers have provided a calculator in their websites, where by just keying in details like date of birth, age of child, sum assured, and policy term, one can easily get to know the maturity amount instantly.

    Can child plan give guaranteed returns?
    Becoming a parent is the most beautiful feeling. But it comes with a lot of responsibility. You need to take care of the child when he is growing up, attend to his nourishment needs, and pamper him with love and care to raise a happy child. However, you have an additional responsibility of securing your child’s future—his health and education. Most importantly, you need to provide for his education so that he can become a responsible citizen and live a dignified life.

    But in today’s time, education is very expensive and it requires a huge sum of amount to fund your child’s studies. Besides, rising inflation and the costs of education makes it a difficult job to plan for the child’s education with limited monthly income.

    In such a situation, a child plan can help you secure your kid’s future. How does a child plan make it possible? And will a child plan gives guaranteed returns? Let us see.

    Features of child plans:

    • Death and maturity benefit: A child plan offers dual benefits. It pays a lump sum to the child if the insured person dies and a maturity benefit once the term of the policy ends. Hence, it’s an insurance-cum-investment plan for your child.
    • Premiums are waived off post death benefit: As the insured pays the premium in a child plan, his death does not make the policy invalid. Post the death of the insured, the premium in a child plan is waived off and the maturity amount is paid to the child once the term of the policy ends.
    • You can choose any term between 5-25 years and a preferred payment option: You can choose the premium amount depending on your feasibility and the mode – monthly, half-yearly or yearly – as you prefer.
    • Partial withdrawal: A child needs funds at various stages of his or her life. Hence, you can choose for partial withdrawals depending on your requirements. This will help you plan your child’s future better and secure his or her life.
    • You can choose to invest the way you want: A child plan offers you an opportunity to invest the money the way you want. You can choose to invest in equity, debt, or balanced funds to build a corpus for your child’s future.
    • Riders and benefits: A child plan comes with a lot of riders and benefits that makes it a complete package. You can choose various riders to go along with it. You can choose premium waiver benefit, if you child plan does not have one. You can also choose accidental death and disability benefit along with the child plan. There is also a critical illness rider benefit to go with the child plan.

    Does child plan give guaranteed returns?
    Yes, it gives guaranteed returns if you are looking to secure your child’s future by giving him a good education, handling any medical emergencies, buying a house for him, or sponsoring his higher studies.

    The guaranteed returns in a child plan depend on the type of plan you choose. If you choose a market-linked child insurance plan, or a ULIP child plan, the returns will be based on the fund value at the time of maturity. The fund value is based on market fluctuations, and for the same reason, there is no guarantee, unlike in a traditional child plan where a fixed amount is guaranteed.

    The best thing about a child plan is that it promises to pay death and maturity benefits in case you meet with an unfortunate death during the tenure of the policy. Also, the premiums are waived off post your death. Your child is assured of returns that will take care of his or her needs for a better future.

    Documents Required for Buying a Child Plans
    Documentation is essential for buying an insurance plan. The set of documents necessary for a child depend on whether the child or the parent is the life assured.

    A child ULIP plan, for example, has two components to it: the first is the risk premium, which is charged towards providing the sum assured in the case of an unfortunate event with the parent, and the second is the investment component. The documents required pertain to the risk that the insurer is underwriting. The other documents are the regular KYC documents required mandatorily by law

    The different documents required are as follows:

    • Id proof
    • Address proof
    • Age proof
    • Income proof
    • Proof of the age of the child

    KYC documents

    Id proof: The id proof is needed to verify the name and identity of the policyholder. In case of a child plan, the identity of both the child and the parent is required. Different documents that can be used for the same are:

    • PAN Card
    • Passport
    • Aadhaar Card
    • Voter Id card
    • Birth certificate (for the child)

    One must ensure that the name given in the application forms must match with the name on the id proof. In case of some mismatch, additional documents confirming the same—like affidavits—may be required.

    Address proof: This is required to confirm that the policy holder is living at the place specified in the application form. Here also, it is important to provide the same address in the application form and the address proof. Valid address proofs are as follows:

    • Leave & License agreement
    • Bank Statement or Passbook with entries for 6 last months
    • Credit Card statement, not more than 3 months old
    • Driving License with address
    • Electricity / Telephone / Water / Gas bill
    • Passport
    • Ration Card
    • Voter ID card
    • Aadhaar Card

    Age proof: The parent, who is the life assured is required to meet the eligibility criteria for the policy and also the age proof of the child is necessary to determine the term of the plan.

    Validproofs of age for parent are

    • PAN Card
    • Passport
    • Aadhar Card
    • Voter Id card
    • Marriage certificate
    • Ration card
    • Birth certificate
    • Driving License
    • School/College mark sheet etc

    Valid proof of age for a child is generally the birth certificate or any hospital certificate that determines the age. If the child is going to a school, any certificate by the school is valid.

    Income proof:

    Generally, the parent is the life assured in a child plan. So, income proof of the parent(s) is required to calculate the sum assured that can be given. This is because, the loss of income to the child in case of an unfortunate happening with the parent is the primary need of a child plan.

    The following are valid income proofs:

    • Salary slips of last three months
    • Last three years Income Tax Returns
    • Bank statement with entry for salary for at least three months
    • Latest Form 16.

    In case, apart from the parents, a grandparent is taking the child plan, then proof of guardianship is also required.

    Providing valid documents makes the process of issuing a policy much easier. So one should not mind when many documents are required. An insurance policy is a legal contract, and proper documentation works to the favor of the insured.

    Why we miss out on creating funds for children
    It is the dream of every loving parent to secure the future of their children. They take every possible step to ensure that their little ones do not miss out on the best things in life as they grow up.

    But is it possible that well-meaning parents may overlook certain aspects while planning finances for children’s future?

    Here are some simple things you can keep in mind while planning your finances.

    How to create funds for children’s future
    Let’s first look at the type of investors in the market.

    Type 1 investors: They save money for buying a home and building a corpus, assuming the corpus will take care of the financial needs of their children. But often they realize later that the amount was not enough, as it is not a dedicated fund for a definite purpose.

    Type 2 investors: They invest a dedicated fund for their children, but they may drain their finances, leaving nothing for their retirement once the future needs of children like education and marriage are met.

    What if they meet with an unforeseen calamity? This may take a toll on their children’s future.

    Financial needs for your child’s future
    Meeting their financial needs with regard to education is one of the greatest concerns for many parents. They need to find funds for tuitions fees, books and supplies, daily commute, accommodation, higher education, overseas education, and much more. Most parents start saving at a very early stage so that there is sufficient financial support when the children start their education. Additional expenses like marriage also create the need for saving for future, especially in the case of the girl child.

    A number of saving and investment plans are available for the parents offered by banks and other investment companies. Life insurance schemes are another investment option that provide financial security and protection when it is needed.

    Unfortunately, not many are aware of or interested in investing in child insurance schemes.

    Are you reluctant to buy child insurance plan? Here’s why:

    • When it comes to life insurance policies, many Indians still consider it as an additional burden on their monthly budget. ‘Why would I need an insurance scheme when I already have bank savings and other investments?’ is a common refrain.
    • If a person has a family insurance scheme, he believes that is enough for the entire family and that there is no need for an exclusive child plan.
    • Lack of trust in insurance providers and insurance agents who are often viewed as commission mongers is another reason why most parents do not invest in child insurance schemes, or any insurance plan for that matter.
    • Financial uncertainty over mobilizing funds for regular premium payments also make many investors stay away from insurance plans.
    • Some are not even aware that they can avail insurance schemes for their children to meet their educational needs. They have probably heard about education loans, but not education plans.
    • Inadequate knowledge about the schemes and claim processes, not clearly realizing the financial risks and burdens on the family when the earning member meets an untimely death, etc. are also reasons why child insurance plans are not so popular in India.

    Why do we need child insurance plans?
    Child insurance plans are a guarantee that your children will have no financial uncertainty in future in pursuing their studies. The rising cost of education often makes it difficult for the parents to support their children’s academic needs or provide the level of education they want. A child insurance plan offers protection from such situations and enables cash flows at every crucial stage of the child’s education. The expenses of higher education or marriage can be easily met with the financial backing that an insurance plan provides.

    There is also the option to choose whether the child will get the payment as a lump sum once the plan matures or in periodic installments. This allows the parent to plan their budget at each stage of their education. One of the greatest benefits of such plans is that the whole amount promised by the scheme is handed over to the beneficiaries if the insured person expires before the plan matures. Waiver of all remaining premiums is a big relief to the families of the departed person. The insured person can also avail tax benefits for the expenses on child insurance schemes.

    It is not just educational needs that these plans take care of. In the case of girl children, their marriages are also covered in some insurance schemes, offering great relief to the families. This greatly helps those who are not willing to spend more on girls’ education so that they can save up for their marriage.

    Tax Benefits And Taxation On Child Plans
    With rising inflation and increasing cost of living, child insurance plans are tailor made to ensure any such cost escalations will not hamper the financial growth of your child. They are tailor made to ensure a robust financial corpus for the child as and when the child grows up. The money can be used for education, marriage, or management of day-to-day expenses of the child.

    An additional benefit of child plans is the tax that they allow for taxation benefits on premiums payments as well as on payouts on death and maturity. The tax benefits and tax advantages offer by child insurance plans are outlined below.

    Tax deductions on premium payment: Child plans are primarily based on the “Exempt, Exempt, Exempt” principle and all the premiums that a policyholder pays for a child insurance plan offer tax deductions under Section 80C of the IT Act, with a limit of Rs.1,50,000.

    Tax-free death benefits: Child plans offer life insurance to the policyholder parent. In a worst case scenario of death of the policyholder parent during policy tenure, child plans not only waive off any future premiums but also pays out the minimum sum assured to the nominee or child at maturity. This payout or death benefit as per the sum assured of the child plan is free from any tax obligations under Section 10 (10D) of the IT act.

    No tax on survival benefits: At the end of the policy term, child plans pay out a survival benefit, which is the financial corpus at the end of the term. This financial corpus is useful to cater for the financial needs of the child. All such survival benefits paid out by a child plan are tax-free as per Section 10 (10D) of the IT act.

    Tax benefits of child insurance plans at a glance

    • Child insurance plans are based on “Exempt, Exempt, Exempt” principle as per Section 10 (10)(D) of the Income Tax Act.
    • Premiums, profits, and maturity benefits are all tax-free for child plans.
    • All premiums paid for a child insurance plan are eligible for tax deduction under Section 80C.
    • Any income or profits generated from a child insurance plan are tax-free under Section 10 (10D).
    • Maturity proceeds or payouts are also exempted from income tax as per Section 10 (10D) of the IT Act.
  • Q: What is a child plan?
    A: Child plans are insurance cum investment financial instruments catering exclusively to manage the financial needs of a growing child. Child plans are designed to offer financial security for all the growing needs of a child at various stages of life including higher education and marriage. Child plans also offer an additional security protection by offering life insurance to the policyholder parent. The child as a nominee gets paid the sum assured in the event of unfortunate demise of the policyholder during the policy tenure. All pending premiums are also waived off in such a scenario.
    Q: Why should one consider opting for a child plan?
    A: Child plans are tailor made to ensure the financial future of the child is secure. Consider the rising inflation and increase in the cost of essentials like school and college education fee, having a financial corpus for the same is an unavoidable financial significance. Considering that MBA costs from a reputed college today cost anywhere between Rs. 25 to Rs. 35 Lakhs. Add to it the inflation and the cost will go even higher in 10 to 15 years’ time. Child plan ensures that financial corpus for your child education is substantial enough to bypass all such financial challenges. Child plans also offer periodic pay-outs, which means that your child has access to money as and when required in certain pre-determined ages. As a parent, you can assure a healthy and prosperous future for your child by investing in the right child plan.
    Q: What is the right time to seek a child plan?
    A: Child plans can be bought for your child from the day the child is born. Ideally, child plans should be bought as soon as the child is born to ensure your child’s financial health remains secure irrespective of any financial uncertainty in the future.
    Q: Can a child plan be bought the minute the child is born?
    A: Yes, you can buy child plans the every day the child is born depending on the eligibility norms of the child plan.
    Q: Who can buy a child plan?
    A: Child plans can be bought by parents as well as grandparents for their children and grandchildren. Check the eligibility age criteria to buy the selected child plan to ensure your age category meets the eligibility criteria of the plan.
    Q: Can a child plan be gifted to a new born child?
    A: Yes. You can gift a child plan as a parent or a grandparent. Grandparents can buy a child plan for their grandchild as a birthday gift for the child.
    Q: Who is the beneficiary of a child plan?
    A: A beneficiary is the one who gets all the benefits of a child plan. So, in a child plan, the child is the final beneficiary getting all the benefits of the plan as per the maturity of the plan.
    Q: Who is the nominee of a child plan?
    A: A nominee is someone who will get the maturity proceeds of death benefits if the policyholder expires before maturity. The child is the nominee in a child plan and will get the Sum Assured paid out in the event of death of the policyholder parent.
    Q: What are the factors to keep in mind when buying a child plan?
    A: The two major factors that you should keep in mind are to firstly understand your financial plans and the amount of money you think your child will need to cater for his or her future needs. The needs must include the education and marriage expenses which are the two major expenses for the future as a parent. Also take into account the inflation rate when deciding on the final corpus that your child should need. The second factor is to understand the type of child plans and their risk factors and opting for the one that qualifies as per your financial needs.
    Q: What are the types of child plans on offer?
    A: Child plans can be classified as unit linked child plans commonly known as ULIP plans and traditional plans known as endowment plans. ULIP child plans invest primarily in equity market along with a lower quantum of investment in the debt market. The returns offered by ULIP plans are market linked while those offered by endowment plans are fixed as they invest primarily in safer debt instruments.
    Q: What is a ULIP child plan?
    A: ULIP is a unit linked child plan which offers returns as per their investment in the high risk equity market. Being market linked plans the returns of ULIP plans are usually higher than traditional child plans but they also carry a higher risk. Policyholders can choose the amount of investment in the equity market and debt instruments with time to ensure a safer investment approach.
    Q: What is a traditional child plan?
    A: Traditional child plans are endowment plans which invest in safer debt instruments. Endowment plans usually offer a fixed return on investment in the form of assured payouts at pre determined times to cater for the financial needs of the child.
    Q: Can one choose the policy term of a child plan?
    A: Yes. As a parent or as a policyholder you can choose the policy tenure of a child plan depending on when you are seeking the plan and the overall financial plan for your child’s future.
    Q: Do child plans offer tax benefits?
    A: All child insurance plans offer tax deduction benefits under Section 80 C of the IT act. The survival benefit paid out by a child plan is also tax free as per Section 10 (10D) of the IT act.
    Q: What are the documents required to buy a child plan?
    A: To buy a child insurance plan you as a policyholder aren’t will need to submit your age and identity proof along with a duly filled policy proposal form. A document supporting your claim to be either the parent or grandparent of the nominee child is also to be submitted as per the eligibility criteria of the selected child plan.
    Q: Can a child plan be bought online?
    A: Yes. Child plans can be easily bought online by either opting to visit any insurance broker portal or by visiting the website of the selected insurer. The broker platforms give the added benefit of comparison of all shortlisted child plans on a single platform allowing you to pick the most suited plan for the child’s future.
    Q: What are the advantages of a child plan?
    A: Child plans ensure your child’s financial future is secure at all times with effective payouts on maturity. The money accumulated by a child plan can be used towards facilitating for all financial needs of your child like education or marriage. Child plans also offer periodic payouts as prefixed percent of the sum assured. With such periodic payouts any short term financial needs of the child can be easily taken care of. Child plans also offer life insurance for the policyholder parent. In the unfortunate event of demise of the parent during policy tenure, child plans waive off the pending premium and offer a lump sum death benefit to the surviving child at maturity.
    Q: Do child plans offer any additional riders?
    A: Yes. Child plans offer a number of riders for you to choose form as a policyholder. Critical illness rider and accidental benefits riders are two of the popular riders for child plans.
    Q: Do child plans offer payouts?
    A: Yes. Almost all child plans offer periodic payouts as prefixed percent of the sum assured at various pre determined times in a child’s life. This ensures that any short term needs of a growing child are taken care of and financial crunch is never a problem for the child’s future.
    Q: What happens if the parent expires during the tenure of the child plan?
    A: In the unfortunate event of demise of a policyholder parent of a child plan, the plans waive off payment of any pending or future premiums. Child plans offer a death maturity as per the minimum Sum Assured as promised. The death benefits are paid out as a lump sum and paid out to the child on maturity along with other benefits like any accumulated bonuses and maturity benefits.
    Q: Can a child insurance plan be used as collateral for education loan?
    A: Yes. You can sue your child’s insurance plan as collateral for education loan of your child in the future.
    Q: How are the premiums for a child plan paid?
    A: The premium for a child plan can be paid annually, semi annually, quarterly or even monthly depending on the child plan you have opted for and the insurer in question.
    Q: What is the minimum Sum Assured in child plans?
    A: The minimum Sum Assured for a child plan depends on the selected child plan, policy term and entry age of the child. Usually the minimum policy sum assured offered by the policy is higher of 10 times of regular annualized premium or (0.5 x policy term x annualized premium).
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