Table of Contents
The moment you become a parent is a life-changing experience. It can be scary and exciting at the same time. The little baby of yours is a bundle of joy, and also a chunk of responsibility. Taking care of your children isn’t just about doing your best for their present, but it also involves securing their future. It is essential to invest in helping them achieve their dreams and access opportunities in education, career, and passion.
The simplest way is to buy a child insurance plan. But how exactly do you go about it?
What Is a Child Insurance Plan?
A child insurance plan combines the design of a savings scheme with that of a life insurance policy to bring your child the best of both worlds. From your end, you pay premiums at regular intervals, and the insurer provides you either a lump sum at the maturity of the policy term or milestone payouts based on the scheme.
Milestone payouts often include key moments, such as the time your child starts their higher education or plans their marriage, for example. In child insurance, the parent is typically the policyholder, and if they pass away, the plan ensures that financial support for the child continues, often accompanied by additional benefits.
Why New Parents Need a Child Insurance Plan?
As a new parent, you’re likely thinking about your child’s education, hobbies, or even their wedding someday. But life is unpredictable, and costs are rising; college fees alone can run into lakhs. A child insurance plan offers peace of mind by:
- Securing Education: Covers expenses for school, college, or professional courses.
- Protecting Dreams: Funds your child’s aspirations, like studying abroad or starting a business.
- Ensuring Stability: Provides financial support if you’re no longer around to provide for them.
- Encouraging Savings: Helps you save consistently, even with small contributions.
Key Features of Child Insurance Plans
Understanding the features of a child insurance plan is essential for making an informed decision. Here’s what to look for:
-
Life Cover
Most plans include life insurance for the parent. If the policyholder passes away, the plan pays a death benefit to the nominee (usually the child or surviving parent). Some plans also waive future premiums, ensuring the policy remains in effect without additional payments.
-
Maturity Benefits
At the end of the policy term, depending on the chosen plan option, you receive a lump sum or a series of staggered payouts. This can be used for your child’s education, marriage, or other goals. Many plans add bonuses to boost the final amount.
-
Premium Waiver Benefit
This is a standout feature. If the parent dies or becomes permanently disabled, the insurer waives future premiums, but the plan continues, guaranteeing the maturity benefit for your child.
-
Flexible Payout Options
Some plans let you choose when and how payouts are received, lump sum, annual instalments, or a mix. This flexibility aligns with milestones like college admission or vocational training.
-
Investment Component
Child plans are often unit-linked (ULIPs) or traditional endowment plans. ULIPs invest in market-linked funds for higher returns (with some risk), while endowment plans offer guaranteed returns for stability. Choose based on your risk appetite.
-
Tax Benefits
Premiums are eligible for tax deductions under Section 80C (up to ₹1.5 lakh annually). Death benefits and maturity benefits are tax-free under Section 10(10D), subject to certain conditions. This makes child plans tax-efficient.
-
Riders for Extra Protection
Optional add-ons, such as critical illness, accidental death, or income benefit riders, enhance coverage. For example, a critical illness rider provides a payout if you’re diagnosed with a serious condition.
Common Misconceptions
Some parents think child insurance plans are expensive, but they’re actually affordable, with premiums as low as ₹500 per month for basic plans. Others believe that general savings accounts are enough, but these lack the insurance and discipline of child plans. Finally, some assume the process is complex, but online platforms make applying and managing plans simple.
Getting Started
Begin by discussing your child’s future with your spouse. Estimate costs for education or other goals, factoring in inflation (6-7% annually). Research plans from trusted insurers, focusing on features like premium waivers and flexible payouts. Utilise online calculators to project the benefits of maturity. Start small if needed, but act promptly; time is your most valuable asset in building a secure future for your child.
Conclusion
A child insurance plan is more than a financial product; it’s a commitment to your child’s dreams. By understanding key features like life cover, premium waivers, and flexible payouts, you can choose a plan that ensures their future, no matter what. How to choose child insurance plans comes down to starting early, aligning with goals, and picking a reliable insurer. As a new parent, take this step to give your child a head start toward a bright, secure tomorrow.