Taking care of child’s future is one of the prime duties of a parent. This is the reason a lot of parents prefer choosing child insurance plans that are created to ensure that their children have a secure and prosperous future.
- Why must you have a child insurance plan?
- Factors to Consider Before Choosing Child Insurance Plan
- Premium Waiver Benefit:
- Loyalty Bonus:
- Control of Investment:
- Best Plans Available in the Market
- Types of child insurance plans
- Traditional Children’s Plans
- Unit Linked Plans (ULIPs) for Children
Why must you have a child insurance plan?
One of the biggest worries of parents is astronomical costs of education. To meet the education-related needs of children and to ensure s/he receives a good quality life, it is necessary to start planning from this day. This is where the child insurance plans take the stage. These plans allow the children to have a bigger corpus during the maturity. The unit-linked children plans make sure that the inflation does not have a major impact on the children’s future needs.
Child plans also make sure that in case a parent dies, the process of premium payment is handled by the insurer. This is where it becomes more beneficial than a regular term insurance plan. The children also receive a lump sum amount just after the death of a parent.
Some common benefits offered by these plans include:
- Most of the insurers offer a flexibility to select from different funds in order to invest in a better manner.
- Premium paid under these policies are tax deductible under Section 80C. Even the income from the plan is free from income tax as per Section 10 (10D) of IT Act, 1961.
- By staying invested in the plan, the insured individuals enjoy wealth booster loyalty additions.
- The customer is able to pay premium throughout the policy term or just once (in the beginning) or under limited pay options.
Factors to Consider Before Choosing Child Insurance Plan
Selecting an insurance plan on the basis of advice of an agent limits your ability to choose the most appropriate scheme. You must analyze different plans by considering these factors:
The features, along with the riders, related to a policy decide the premium you have to pay for a plan. Make sure to analyze policies of different insurers before finalizing the one that matches your budget and needs.
Premium Waiver Benefit:
Most insurers also pay a premium on behalf of an insured individual in case the policyholder dies. This continuation of premium payments ensures that the beneficiary (child) receives the maturity benefit.
Each policy comes with a unique set of riders related to benefits that insured person or child receives in the case of a tragedy. These riders are associated with a diagnosis of critical illness or severe accident of the policyholder. The companies also provide an additional death benefit in case of a death of a parent.
Make sure that the policy allows partial withdrawals. You will be able to withdraw money in case of an urgent requirement. You must also be able to switch between funds to derive maximum benefits of changing market conditions.
Almost every plan comes with loyalty bonus in which the customers receive perks if they remain associated with the plan. Check which company offers the best loyalty bonus.
Control of Investment:
Make sure the insurer allows you choose choose from thedifferent options of funds, like debts, equity and balanced funds.
Best Plans Available in the Market
Among all the available options in the market, these are the best investment options for your child:
LIC Child Career Plan: This money back endowment policy allows an individual to insure a sum between 100,000 to 1 crore. The individual can surrender the policy after s/he has paid a premium for three full years.
PNB Metlife Smart Platinum: The policyholder is eligible for partial withdrawal after 5th year. Auto-rebalancing option helps in managing investment risk. An individual can select from 6 unit-link funds for investment. The company pays maturity benefit when the insured individual reaches 99 years of age.
Kotak Headstart Child Assure: It is ideal for parents who prefer flexible debt investment and flexible equity options. When the plan gets matured, the insured receives a planned corpus.
Max Life Future Genius Education Plan: The policyholder is eligible for four moneybacks to take care of education expenses of the child. The nominee can choose from two options, namely monthly income for 135 months or lump sum benefit.
Types of child insurance plans
There are two major types of child insurance plans offered by the companies, including:
Traditional Children’s Plans
These policies constitute endowment plans or money back plans aimed to secure the children’s future. In these plans, a defined payout is received at a specific period of time. In case a tragedy happens to the parent, the nominee (child) receives the sum assured. The returns from the policies are usually low, which may make it difficult to meet the inflation.
Unit Linked Plans (ULIPs) for Children
These plans are comparable to regular ULIP plans. The beneficiary in these plans is a child instead of an individual who buys the plan. Several plans allow you to select the amount you prefer as the sum assured on the basis of premiums. ULIPs are quite popular among individuals, as they offer financial security to them and their family. Free asset allocation is also an integral part of some plans
A lot of companies also allow the individuals to customize the child care plans as per the needs and preferences. The individuals can choose sum assured and policy term as a part of customized plans. Various other options are also altered to match the future requirements, including the level of protection, type of fund for investment and premium payment on a regular basis or in the beginning.
A child insurance plan with multiple benefits is the best gift you can give your child. Make sure to compare different plans among all leading options.