Features Of Child Plans
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.
Features of Child Insurance Plans
Most often, the life insurance policy for kids is designed to provide a safety net to the child in case of financial difficulties during important decisions of life. These plans are available in both linked and non-linked varieties.
Premiums
Payable as a lump sum at the start of the policy tenure. You may also choose to pay it frequently on a regular basis or for a limited period of time. Most Life Insurers provide options such as monthly, quarterly, half-yearly, yearly. Premium amount varies as per the sum assured chosen by you in case of traditional child plans.
Sum assured
This is the amount that will be paid out in case of the policyholders’ demise. Most of the time, the sum assured should be above 10 times the current gross income of the insured.
Maturity
The maturity amount should be chosen with an eye on the future. Assuming your child is 8 years old, and his policy will mature in 10 years’ time, then you should take into consideration factors such as inflation and interest rates. If you fail to consider these factors, the released funds may fall short of the requirements in future. Also, plans such as single premium plans may not provide appropriate maturity benefits and features, so kindly check the policy documents clearly before applying.
Policy Tenure
Mostly meant for children up to the age of 18-21. Here, tenures can be selected from birth until the child reaches a predefined age. The policyholder/insured is not to be 70 plus years at policy’s maturity.
Segmented pay-outs
With child life insurance policies, you can select if the child will get payment as a lump sum, or in yearly installments. Such a setting will help in paying dues such as college fees, marriage expenses, higher education expenses, appropriate funds for starting a business, etc.
Premium Waiver Benefit
An inherent feature of child plans is that premium waivers become applicable when the insured dies in a stipulated duration of time. In this situation, the sum assured will be paid out to the beneficiary, while the premium for the remaining tenure will be paid by the insurer. At the end of the tenure, the maturity amount will be provided as detailed in the policy document. In case premium waiver is not provided automatically with the plan, you should opt for a premium waiver rider.
Riders
Specific riders are available that give you more out of life insurance policy. The riders are available in three basic categories - premium waiver, critical illness, and accidental death and disability. The premium waiver may already be added with your plan i.e. Inbuilt, so please check the policy documents in this regard. The critical illness rider provides coverage for a set of predefined critical illnesses, while accidental death and disability riders pay an additional sum assured in case of unfortunate accidents that cause disability or death of the insured.
Partial Withdrawal Clause
A partial withdrawal clause allows the policyholder to make a partial withdrawal, in case of a financial emergency. Many policies also come with the option of partial liquidity.
Choice of Funds
A child insurance policy such as a ULIP scheme allows a policyholder to select the choice of investment funds (equity, debt, hybrid and money market). You also have an option of a Systematic Transfer Plan and Dynamic Fund Allocation.
Conclusion
Child plans are essential to meet the needs of providing your child with a good education. They ensure that cash flow doesn’t stop at any crucial stage of your child’s growth.
Also read: A Child Life Insurance Plan Can Help Protect Your Child's Future
