Child plan or child insurance plan is an insurance policy formulated to provide financial security for your child’s future. A child plan also acts as an Investment plan, as the amount invested in a child policy can be used to fulfil the future finances of your child during their crucial years, for instance, higher education or marriage. For example, an MBA or abroad education, or marriage are quite expensive these days. A child plan helps in easing the moment constraints and helps your child fulfil their dreams. Typically, a child insurance covers the life of the parent who has a minor child to take care of. However, the benefits of the plan are offered to the children when they reach a certain age and need the funds for their future needs. The funds can either be received in instalments or as a lump sum amount. In India, child insurance plan LIC is one of the most popular child investment plans among people. But, it is suggested to look for various child plans offered by the life Insurance companies in India and then choose the best child plan among them.
A child plan can be broadly categorised into two categories:
Investments under traditional endowment plans provide stable returns. The money you invest in a child plan is further invested in Debt fund to provide a better interest over the sum assured. An Endowment Plan gives one payout at the end of the contract, i.e., on maturity or in the case of death of the parent. Also, it is essential to keep a check on your bonuses and the interest applicable on your returns, like simple or compound interest.
These are Market-linked plans that provide volatile payouts. Under Unit Linked Insurance Plan (ULIP), money is invested in Equity Funds so the returns depend on the market fluctuations. It is suggested to invest in ULIPs for longer durations (like more than 10 years) to ensure better returns. Moreover, some of the Life Insurance companies that offer ULIP also give an option to customise different funds enabling you to have control over your investment.
The criteria for purchasing a child plan differ by company. A child plan can be purchased at any age between 18 and 21, with maturity ranging from 60 to 65 years. According to the schedule, the amount assured often varies. Some policies have no minimum requirements, while others have requirements of at least 5 to 10 times the annual premium.
In the event of death in certain circumstances, the insurance provider does not have compensation. These are referred to as exclusions. The following is a list of child plan exclusions.
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The following documents are needed to begin an insurance plan for your children:
One of the major benefits of a child plan is that it serves as both an insurance and investment opportunity. Apart from that, a child insurance plan has various other benefits. Some of them are mentioned below, take a look!
Child plan is highly beneficial in saving as well as growing money for your child’s future. Generally, child insurance plans have the capability of providing as much as 10 times of the invested amount. This amount can be used for your child’s education, marriage or during any medical emergency. The Power of Compounding applicable on these funds does wonders in growing the wealth. So, Investing in child plan ensures that there is no lack of money for your child's major milestones or sudden incidents.
Child insurance plans offer tax benefits as well. Under Section 80C of income tax Act, policyholders can claim tax deductions. If the premium paid in a particular year exceeds 10% of the basic insured amount, one can claim tax exemptions upto 10% of the sum assured amount. Additionally, under section 10 (10D), one can avail tax deductions on the interest earned on an investment if the premium paid per annum does not exceed 1/10th of the basic sum assured. However, in case of death, the funds disbursed are fully tax-free.
Your child insurance policy can be used as a Collateral for a loan after a certain lock-in period. This gives you an additional asset and thus enhances your financial standing. Child plans can also be used as a collateral for various child-related borrowings like that for marriage, education etc.
The money you save for your child does not grow with time and will give you the same value after a few years. This is why investing money is important. When you invest money in a child plan, your money not only grows with time but gives you financial support as well.
Children's insurance plans, and most types of life insurance schemes, protect dependents. The child is the one who is being covered in this scenario. In the case of the insured parent's untimely death, the life insurance premiums from the child plan will be used to fulfil the child's immediate and daily needs and future needs.
A child's future strategy also includes funds for higher education. Many child plans have a premium waiver feature that means the child plan continues in effect for the remainder of the insurance period in the event of the insured parent's untimely death. The life insurance company is responsible for paying the policy premium. The money invested so far is invested until the policy term ends, after which money is paid to the child to cover higher education costs.
Choosing the right child insurance plan is important for the child's long-term development. This can be seen as a financial cushion in the event of an unforeseen event and as an investing tool for the child's benefit. Here is a listing of few deciding factors which should be considered:
Particularly if the coverage amount and term of the plan are the same, the cost for different child plans varies due to a variety of reasons and particular insurer preferences. To make an informed decision, look at the various premium amounts offered by insurance companies.
The best child plans are those that provide the most maturity benefits for the money spent in premiums. Even in case if the policyholder dies during the plan's lifetime or lives beyond it.
Aside from the base plan benefits, various providers provide optional benefits for a small cost. Furthermore, while some insurers may have a few incentives as part of the standard plan features, others may charge a fee for them. Comparing plans will assist you in selecting the right plan with the most incentives.
It indicates how many claims were ultimately granted out of all the claims submitted. The higher the percentage, the more likely it is that the claim will be resolved. Select a company that has a high lawsuit settlement rate.
The amount of coverage is determined by the policyholder age, salary, and other factors. Compare different policies from different banks to find one that provides the most coverage for your child's future.
Choose a child plan for the longest term possible to ensure your child's financial security for as long as possible, even after he reaches maturity. Comparing multiple child plans will assist you in selecting a plan that provides the longest policy term at the most affordable price.
Every insurer's terms and conditions differ, and it is up to you to determine whether or not you will benefit from a plan. Please study the details carefully and choose.
While selecting a child insurance plan, opt for an insurer who has a high claim Settlement Ratio. It ensures easy processing of claims at the time of crisis. Here are the steps you need to follow for claim processing:
This is one of the best child plan for education and marriage. It is a participating, non-linked, traditional, and money-back plan. With the aid of the survival advantage, this plan is a customized plan that caters to various phases of your child's life, such as education, marriage, and others. During the policy term, it also provides risk coverage for children.
If you are looking for education insurance plans, you can move ahead with this one. LIC Jeevan Tarun is a non-linked participating Limited premium payment plan for children that provides savings and life insurance benefits. The insurance plan enables you to provide for your child's higher education, hostel fees, and other expenses.
This is a traditional, participating child plan that provides periodic guaranteed payouts. This insurance provides you with tailored policies to meet your child's evolving needs, from career choices to hobbies and interests.
A traditional participating child insurance plan, SBI Life – Smart Champ Insurance, assists in protecting your child's educational needs. After your child turns 18, you will enjoy smart benefits in four equal annual instalments. It offers a variety of benefits like security, reliability and flexibility.
Bajaj Allianz Life Insurance Co. Ltd. was founded in 2001 as a joint venture between Bajaj Finserv Ltd and Allianz SE. It has been in use for more than a decade. The Bajaj Allianz Young Assure Plan is one of the company's life insurance plans.
HDFC Life YoungStar Udaan insurance plan is a traditional participating insurance plan. This HDFC child education plan is perfect for parents who want to save for academic expenses, wedding expenses, and all miscellaneous and extracurricular expenses that occur during children's initial life.
A Child Insurance Plan makes sure your child's future is secure, even if you are not around. It gives your child a stable financial cover that any parent would wish for. So don't wait anymore! Set your priorities right, select a child plan as per your requirements and insure your child's future today!
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