Child Insurance Plan

Child insurance plans are one of the best financial tools for parents to ensure the happiness and success of their children. It is an essential investment for your child’s education and marriage. The plan can help you lighten your responsibilities while you are there for them and even when you cannot be.

A child insurance plan helps you to secure the future of your child by ensuring that his goals are met even if you are not there.

Just like any other insurance plan, a child plan also requires you to pay regular premiums. The premiums you pay are allocated to your chosen funds in the child investment plan. You can choose various modes available to pay your premiums for the child policy. These are:

• Limited Pay Pay for a limited time and enjoy the benefits of the policy
• Single Premium Pay for a lump-sum premium for the whole policy at once.
• Regular Pay Pay regularly depending on periods such as monthly, quarterly, and yearly.

For instance, Ajeet is starting to save for his 5-year-old daughter’s higher education and marriage. He plans to invest Rs 10,000 monthly in a child savings plan with a life cover of Rs 12 lakhs, for the next 15 years.

Case 1: If Ajeet survive the policy term

Ajeet will be entitled to receive the maturity benefit from the child savings plan. This is the fund value of the investments he has made into the child plan and any bonuses. Depending on the type of child insurance plan, Ajeet can either receive the lump sum or convert the sum into a regular pay-out.

Case 2: If Ajeet dies during the policy

If Ajeet does not survive the policy term, then his daughter will receive the death benefit. This will be higher than the sum assured or the fund value at the time of death. If Ajeet had opted for the premium protection benefit the child investment plan will continue after paying the death benefit. His daughter will receive the maturity value upon the expiry of the plan.

Child insurance plan is a widely available financial product and most insurers offer it with different riders to appeal to a wide variety of customers.

Child Endowment Plans

Child Endowment Plans offer a safe investment option for your money by offering guaranteed maturity benefits. These child investment plans are best when you know the amount that you will need for the goal.

Also, with guaranteed benefits and goal protection options, you can be sure to achieve your goal even if you cannot be there for your family.

Child Endowment plans to offer a savings avenue along with a life cover that ensures your financial goals are well-protected even in your absence.

Child Moneyback Plans

Child moneyback plans offer a long-term, safe investment option for your child’s future. These plans are ideal for long-term financial goals, such as funding a four-year undergraduate degree.

Money-back child plans also offer bonuses to aid the growth of your investment. These bonuses add to your plan’s maturity value.

These are some of the best child plans as you enjoy the benefit of a life cover while getting a portion of the sum assured at regular intervals.

Child Savings Plan

Child savings plans are generally ULIPs that give you more freedom as an investor. You can choose the amount of risk you want to take on the invested money. You can also use one or more automated portfolio strategies to benefit from market movements.

Some child savings plans also offer additional bonuses for long-term investors. You can withdraw money from the accumulated corpus after completing five policy years. Withdrawals are tax-free, so you have the freedom to withdraw at any time after the lock-in period.

Life Cover

Life cover is an integral part of most investment plans from life insurers. A child saving plan also includes a cover on the life of the policyholder. This will protect the child’s dream in case anything happens to the policyholder during the term of the child's policy.

Goal Protection from Death or Disability

The child investment plan will continue to invest the due premiums in your child’s goal after your untimely demise. This option ensures that your child can achieve their goal even after your death, without having to pay any extra premiums.

Systematic Withdrawals

Child education plans and endowment plans offer the option of systematic withdrawal or automatic payments from the plan in the final few policy years. This allows your child to meet the financial needs which may arise gradually.

Bonus Additions

Participating child saving plans and unit-linked plans offer rewards for staying invested for the long-term. While ULIP will add units as loyalty additions and wealth boosters endowment and money-back child plans accrue annual bonuses. These bonuses are payable with the maturity value of the child policy.

Avail of Loans & Partial Withdrawals

Child endowment and moneyback plans acquire cash value after two years of investment. Thus, in case of emergencies, you can take a loan against the policy without having to break the investment. Child ULIPs, on the other hand, offer partial withdrawals after the five-year lock-in period.

Riders

Child insurance plans come with a variety of riders. The most prominent add-ons offered with child investment plans are critical illness cover, accidental death cover and the premium waiver option. Some insurers offer the premium waiver option as an in-built feature of the child policy. The critical illness cover protects against a set of terminal diseases, while the accidental death cover provides an additional sum in case of accidental death.

Choice of Funds

A part of the premium paid for a child investment policy is invested in market-linked assets. The insurance company provides the policyholder with an option to choose from different funds. The funds under the child saving plan invest in equity, debt or money market instruments.

Premium Waiver Benefit

An important feature of a child insurance plan is the premium waiver benefit. In case the policyholder dies in a stipulated duration, the beneficiary gets the sum assured and the insurance company continues to pay the remaining premiums till the maturity date. The child saving plan from Canara HSBC Life Insurance, Invest 4G, provides the premium funding option apart from other features.

Lump Sum Benefit

After your death, the death benefit is provided in a lump sum, i.e., the whole amount in a single payment. In Child education plans such as Smart Junior Plan, you receive guaranteed pay-outs in a lump sum, starting from the last 5 years of the child policy. This can be used to pay off any debts or loans you left unfulfilled.

Features of Child Insurance Plan

The following features and benefits of a child insurance plan help secure your child’s future:

• The best child plans favour long-term, disciplined investments.
  
  
• Provides financial security especially for the child’s goals, so that your term insurance is free to provide for the family’s survival expenses.
  
  
• Market-linked returns and bonus additions ensure your child's investment plan stays ahead of the inflation.
  
  
• Life cover and premium protection options ensure that the child receives adequate funds to meet their important life goals.

The best child education plan for you should be the one that can solve your purpose in the most optimum way possible. There are some factors that should be considered before you decide to buy a child plan.

Start Investing Early

Starting early gives your child's savings plan ample time to grow your money. You also get more time to make adjustments and achieve a bigger goal than you initially intended.

Consider Inflation & High Education Cost

Inflation keeps on shifting your goalpost for the child’s plans. However, planning your child plan investments with after-inflation costs would let you catch up to it in the long run.

Look for Premium Waiver Benefit

Premium waiver benefit allows your child's investment plan to continue without the need for additional premiums. This option comes into force if you suffer from a critical illness or accidental disability which affects your income.

Such emergencies do not allow for death benefits but they can affect your plans. However, with the premium waiver benefit, you can rest easy as the child will receive the intended maturity value.

Consider the Premium Protection Option

If this feature is available in the plan, then the premiums will be taken care of even after you die. The company funds all the premiums that remain to be paid after your death under this option. Thus, the policy continues even after your death and your child will get the maturity benefit as promised by the company.

This feature makes sure that your family does not have to worry about the premiums.

Check for Partial Withdrawal Option

A partial withdrawal facility allows you to withdraw money from your fund. This comes in handy in the time of emergencies when you are in need of quick cash.

You should look for the policy that provides you the option of partial withdrawals. Policies such as Canara HSBC Life Insurance Invest 4G offers you this option. Partial withdrawals made after the lock-in period of 5 years are tax-free as well.

Option to Add Riders

Riders are the additional benefits offered over and above the policy which enhance the scope of your existing policy. Riders cover those things that are not covered by the base policy. Some of the most popular riders include the following

1. Critical illness rider
   
   
2. Accidental death benefits rider
   
   
3. Accidental total & permanent disability rider

Though some riders are added by default in some policies, some add to the cost of your premium. You should choose the policy that has the most rider options available to get the best from your policy.

Frequency of Premium Payment

There should be multiple options to pay your premium. You must be able to pay as you like. Many policies have the option of limited payment. This means you pay your premiums for a limited time and enjoy the benefits of the policy for a long.

For example, Smart Junior Plan has a limited payment facility. If you have chosen a policy for 20 years, then you have to pay up to 10 years only.

Check for Regular Payout Option

The purpose of the child insurance policy is to provide your child with the money which will help in his education or other goals. This money should be present when needed.

Plans such as Invest 4G has the option of systematic withdrawals that makes regular withdrawals from your fund. This helps create a regular income stream.

Consider the Associated Charges in the Policy

This is also an important factor to look for before you buy a policy. The insurance provider levies charges on the maintenance of the policy. Some of the charges associated are:

1. Fund management charges
   
   
2. Premium allocation charges
   
   
3. Administration charges
   
   
4. Switching charges

Choose the policy that has the lowest charges involved.

Terms & Conditions of the Child Insurance Policy

Understanding the benefits and exclusions of your child policy allows you to ensure that the policy will be useful in every situation. For example, how much is the regular payment from the plan, which events are covered under the policy, etc.

Before buying a child insurance plan, you must be sure of how much you should invest. Education, as we know, is getting costlier with each passing year. School fees are rising constantly. Also, if you want your child to go for higher education in the field of engineering or medicine etc, then the cost is even more.

Thus, to make sure your child can pursue what they want, your income may not be enough, and you need to invest in a child education plan as well. But how much should you invest?

Well, this depends on the educational course and institution you are targeting. You can plan your monthly savings into the child education plan accordingly.

Here are the steps you should follow to know how much to invest:

• Ascertain the goal you want to achieve
• Estimate the inflation rate at the time the child will attain education age
• Estimate the expected rate of return of the policy.

Education is one area with one of the highest inflation rates. Thus, it becomes even more important to plan for your child’s education as early as you can.

For example, suppose, you are planning for an MBA for your child, 10-15 years from now. Here’s what your child saving plan can look like:

* Assuming inflation rate of 5% p.a. and CAGR on Child investment plan of 8% p.a.

There are certain things in the child insurance policy that are excluded from the policy. This means that these things are not covered and the insurance company will not provide any benefit if death is due to anything that is excluded.

Suicide Exclusion

If the death is due to suicide or self-harm. Under plans such as Invest 4G, if the death is due to suicide within 12 months of commencement of the policy, then 80% of the premium paid or surrender value is paid.

Death Due To Drug Overdose

If you die due to consumption of drugs that are not prescribed or excessive intake of alcohol, then also no death benefit is payable.

Death Due To War

If you die due to war (declared or not) or any type of civil commotion, your family will not receive the death benefit.

Hazardous Activities

There are certain adventure sports that pose a risk to life such as sky diving, mountaineering, scuba diving, etc. If you die due to participating in these games then your coverage ceases to exist.

Taking Part in Criminal Activity

If you die during indulging in any activity that is considered criminal or illegal, then this will also not be covered in your child insurance plan.

Child insurance plan is an investment option designed to serve as a wallet for major life goals of a child. Be it higher education, hobby, or marriage child insurance plan gives you the benefit of investing, growing and using your money as per your child’s needs.

If you mean to provide for your child’s education goals the plans can work as child education insurance. The plan will help your child achieve the goal even if you cannot be there.

Few more important reasons to get going with a child insurance plan at the earliest are:

• Beat the inflation in higher education costs with investment as per your risk appetite using automated portfolio management options
• Prepare for an unexpected expense with additional corpus for your child’s goal with bonuses and additional units
• Stop the unfortunate events like death and disability from harming your child’s future and plans
• Face financial emergencies or change of plans with partial withdrawal and loan facility from the plan
• Keep your child’s investment corpus safe from taxes with tax-savings while investing and withdrawals