Most Frequently Asked Questions For Child Life Insurance Plans

Child Insurance plan can be in the way of a traditional plan which is a long-term plan where premium is payable for a longer or limited period. Upon maturity of the plan, a predetermined fixed amount is payable to the child. In case of demise of the life assured, the child gets the death benefits immediately and the policy continues till maturity because of the premium waiver feature. Another type of child insurance plan includes ULIPs. 

Most Frequently Asked Questions For Child Life Insurance Plans

Below is the list of some of the frequently asked questions for child insurance plans- 

• Which expenses am I saving for?

This is the first place to begin this basic question while choosing a child plan. It is important to consider the type of education you are saving the corpus for. Given today's competitive environment as well as for multifaceted development, it is essential for every child to actively participate in extracurricular activities. You must save if your child wishes to pursue additional vocational training in a field of their choice in the future accordingly. 

• When should I start planning?

Starting early gives a long time period to invest, which allows you to build your wealth gradually. It is prior to opting for a plan that encourages long term investment.

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• How do I estimate the costs?

While deciding the amount to be allocated, you need to estimate the education costs of your children according to yearly inflation rates. 

• What will be the plan’s tenure?

The maturity period of your plan is usually according to your child's present age. If your child is now 6 years old, he/she will be pursuing college in 11-12  years. Therefore, you will have to opt for a child education plan with a maturity term of at least 10-12  years. 

• Does child plans allow partial withdrawals?

In case you need urgent funds before your plan reaches the maturity period, a partial withdrawal feature can come in handy. Being able to withdraw funds in intervals can be a great assistance in fulfilling the ever-growing educational costs

•  Does the plan include a premium waiver?

Most child plans include a premium waiver which allows the policy beneficiary to benefit from the plan after the maturity. In case of the policy holder’s demise, all outstanding premium payments are waived and the nominee receives an assured sum on maturity. 

• Should I opt for an equity-linked or endowment plan?

Depending on your risk appetite, you can choose either one of them. With a higher risk appetite, you can go for unit-linked child plans over a period of 10 years or more, or for equities. However, if you are reluctant to take investment risks, it is safer to invest in an endowment plans which is protected against market volatility while providing necessary cover. Endowment plans act as a combination of insurance cover as well as saving plan.

•  Does the plan include bonuses?

You can be eligible for bonuses under your plan as per its terms and conditions. Bonuses start getting credited after the first year and help maximise the fund. A reversionary bonus can be simple or compound. Some plans may include a cash bonus and terminal bonus. 

•  How much tax will I be saving?

According to Section 10D of the Income Tax Act, 1961 the sum assured plus any bonus claimed on maturity or due to death of the insured are exempted from taxation. The premium paid towards the policy is also eligible for tax deduction under Section 80C.

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Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.