Best Child Insurance Comparison in India
Table of Contents
Caring for a child, though delightful, involves expenses. Whether you are nurturing your infant or paying for his/her school and college fees, you have to spend money. If you want your son/daughter to have a bright career, you have to devise a financial plan for your child’s future. Higher education requires money and given the current costs, the requirement is quite considerable.
A child insurance plan comes into play in these situations. The plan provides an avenue of investment for your child’s future and also guarantees the promised corpus even if the parent dies prematurely.
Types of Child Insurance Plans
Child ULIP
The primary feature of children’s ULIPs is that they give individuals a three-pronged advantage, together with high insurance coverage, disciplined investments, and participation in the equity market. Three advantages mean that the sum assured is given to the nominee child on death of the insured parent, the future premium is waived off and the maturity value would be paid at the time of maturity, ensuring that your children’s future dreams are fulfilled.
Unit Linked Insurance Plans
The payouts at maturity of ULIPs is determined by the markets, as the funds in ULIPs are invested in equity instruments. This plan is good for longer tenures (more than 10-15 years) of policies. Insurers may provide the option of choosing between different investment funds, allowing you more control over the money you have invested. Some dynamic plans are also available where the profits may be transferred directly and automatically from equity to debt instruments.
Traditional Endowment Plans
These policies provide stable returns in the form of bonuses over the sum assured. In general, bonuses on traditional plans are paid from 2nd year onwards, and you can check if the bonus is in cash or if a reversionary bonus will be compounded or have simple interest.
Importance of Child Plan
Secures the future of the child
The child plan continues even after the parent dies and pays the maturity benefit as promised. When a parent buys a child plan, he or she is assured that whether he or she lives or dies, the plan would pay a benefit on maturity. This benefit can then be used to fund the child’s education or marriage. Thus, a child plan secures the child’s financial future.
There is no burden of paying the premium if the insured dies/Waiver of premium
Child plans also have the unique feature of an inbuilt premium waiver benefit. This benefit waives the future premiums if the parent dies during the plan term. So, the parent is not only assured of a maturity benefit, he or she also knows that the family would not face the burden of paying any premiums to continue the plan. The plan would continue automatically and pay benefits as and when promised.
The plan can be customized with riders
Child plans, whether traditional or unit linked, understand the importance of securing funds for your child. That is why these child plans also allow various add-on riders which increase the scope of coverage. The policyholder can choose any rider as per his requirement and enhance the coverage provided by a child plan.
The plan helps in saving taxes too
If you want to know another reason why a child plan is important, sample this. The premiums which you pay for the plan are tax-free under Section 80C up to a maximum of Rs.1.5 lakh. Moreover, any death benefit or maturity benefit received under the plan is also completely tax-free.
Creating a corpus
Having a corpus for your child’s future needs is essential and a child insurance plan helps you in creating such a corpus. By providing coverage for premature death the plan also protects your financial plans for your child from going haywire in case of death.
Disciplined Savings
A ULIP Child Plan allows a policyholder to start disciplined savings for meeting the future life goals of their children. A monthly premium payment mode in a ULIP provides the same rupee cost averaging benefit that a Systematic Investment Plan (SIP) provides under a mutual fund scheme. Thus, consistent and disciplined savings provide best possible returns for meeting the future financial requirements of your children.
Critically Chosen Maturity Date
You must always choose a maturity date which is a few months prior to the date before which you would require the amount. For instance, if your child would require financial help at the time s/he turns 21, then your policy should ideally mature 6 months before your child turns 21. This way you would not be in a pickle, in case of any transactional or claim settlement delays.
Conclusion
The ideal time to buy a child plan is at the earliest possible time frame. However, it would be ideal to gift your child with a child insurance plan when s/he turns 1 as their very first birthday gift.
Also Read: LIC's New Children's Money Back Plan
3 Features of Child Insurance Plan which Make it a Must have Cover
