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Child Plans

What is a Child Plan?

A Child Insurance Plan, alternatively known as a Child Plan or simply a Child Plan is a way to secure the future of your children. Child Plans ensure that the future of your children is secure through insurance cover. Parents usually opt for Child Plans in order to create financial security for the children’s education, marriage or any other expenses that will have to be faced. Child Plans also take care of contingencies such as the untimely death of a parent or parents. Child Plans ensure the continued financial security of the child even in the case of such an unfortunate tragedy.

What are the benefits of buying a Child Insurance Plan?

Many people fuss over the need to buy Child Plans over simple Term Plans, which offer substantial cover at a small premium cost. However Child Plans have some very specific benefits that make them more attractive in case of securing your child’s future. A Child Plan Insurance policy is linked to the actual expenses your children may incur, such as education loans and marriage loans. Hence, they offer smarter coverage in the long term. The biggest benefit of Child Plans is that if the policyholder (the parent) expires during the term of the plan, the insurance company takes over the future premium payments. A death benefit is paid out to the family and the child, but the policy goes on till maturity, paid for by the insurance provider.

What are the different types of Child Insurance Plans?

There are broadly two types of Child Plans available. Different insurers adopt different approaches to their policies, but these are the two categories all plans eventually fall under.

1. Unit Linked Child Plans:
A Unit Linked Child Plan is a special variant of the regular Type II Unit Linked Insurance Plans. Just like standard ULIPs, the Child plans have an insurance product and an investment product. A part of your premium is diverted to the mortality cover offered by the Child Plan and also to other policy overheads. The remaining part of the premium can be invested in funds as per your discretion. The fund then gives market linked returns on the policy. There are tax benefits associated with the premiums under 80C of the IT code. Unit Linked Child Plans tend to be expensive. This is because in case of the death of the policyholder, only the sum assured is paid out to the child. The insurance company then has to take over all future premium payments and invest them as per the policy. The fund maturity amount is then paid out at the end of the policy term.

2. Traditional Endowment Plans:
A traditional plan does not have any investment product. The premium payments go entirely towards the debt instrument of the policy – death coverage, insurance policy overheads. The insurer keeps the decision to invest the money gained through the policy. The maturity amount of the policy and the death benefit decide the returns that the policy will generate. The traditional plans carry far less market risk than the Unit Linked plans as the bank itself decides on the investment. Hence, these policies are a bit more economical in terms of premium payments. The maturity returns are stable, yet guaranteed and are not linked to market values.

Why choose a Child Insurance Plan?

Child Plans are custom built to ensure the future of your children. They are tailored to offset large future expenditures and have milestone payouts at various junctures during the policy. For instance, depending on your policy structure, there will be payouts for education loans, marriages etc. Child Plans offer all the benefits of a Term Plan with a death benefit paid to the Child in case of an untimely demise of the policyholder. Additionally, the policy does not expire in this case, it continues till maturity with the insurance company taking over the premium payments. All of these features ensure that your child will be financial secure for the major milestones in life, even in the case of your death. Hence, a Child Plan is a great insurance investment for any parent looking to secure their child’s future.

How to choose a Child Insurance Plan?

There are a number of Child Insurance Plans in the market and choosing between them can be quite tricky. You should look into the following criteria while choosing a Child Insurance Plan:

1. Milestones to cover:
What are the milestones from your child’s life that you wish to cover under the child plan. There are plans specifically tailored to certain milestones such as higher education or marriage. Making this decision will mean you’re halfway to the decision of choosing the right plan for your child.

2. Policy Type:
You should decide between Unit Linked Child Plans and Traditional endowment policies. The premium rates are charged differently and the returns are also quite different in both policies. There is some factor of risk associated with the ULCPs, but the rewards are also greater. The traditional plans have lower premiums and guarantee and safe return.

3. Death Cover & Maturity benefits:
Choose the plan that has the right amount of death cover and the best maturity benefits available. Many plans these days offer the facility of partial fund withdrawal in order to meet milestones and then carry on with the remaining policy term. There are many plan options where riders can be attached to cover for situations such as accidental death, comprehensive health coverage and accidental disability riders. These are built in the plan to ensure some financial support to the family in case such an unfortunate situation arises.

When is the right time to buy a Child Insurance Plan?

Planning for your children’s future must begin early. Most parents invest in a Child Plan anywhere between 10 to 20 years before the major milestone. For instance, if you’re looking to go for a Child Plan in order to fund your child’s college education, the milestone year of payout from the policy will be when your child is 18 years of age. You should select the plan and decide the maturity benefits accordingly and invest in the policy early on. A similar principle applies to marriage cover type plans. The biggest factor to consider in buying Child Plans is the expected milestone years for your child.

For a genuine and transparent advice on your Child Insurance Plan, call our advisors on 9948 661 204 and get a Free Consultation for the first time. Alternatively, submit our enquiry form and one of our Financial Advisors will get back to you at your convenience.

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