CHILD INSURANCE

WHY IS THEIR NEED TO TAKE CHILD INSURANCE? One of the dream that each one of has is to fulfil all the desires of their kids. Thus it has become a basic need for taking Child Insurance is as follows:

  • Educational Fund
As we all are aware that education is the most crucial expense for a child. And, parents are concerned about the same right from the birth of their child. Also, cost of education is high because one has to consider about the inflation rate as well. Therefore, One should plan as early as possible else they will have to apply for education loan at the later age. Cost could be 15 Lac- 1 Crore or even more. By opting for Child Education plan person gets the sum assured + additional benefits at the time of maturity to fulfil the education needs of their child
  • Marriage Fund
Just like education, marriage is also one of the most critical phases in a child’s life. And, costing of marriage is quite high and is increasing day-by-day. Thus, as a parent, it is important to keep yourself well planned in advance.
  • Unfortunate death
If your child is secured by child education plan then even in the case of unfortunate death of sole earner of the family the education of the child will not suffer. As the premium of the remaining policy term is waived off by the companies and child gets full benefit of the plan at the maturity (as chosen by the parents)
  • Disability Benefit
Nowadays companies have also come up with an option where they can even take disability cover. Under disability cover by giving a little bit extra premium the person’s premium will be waived off for the remaining policy term if they, unfortunately, become disabled

  • Guaranteed Loyalty Benefits–

In child education plans companies provide guaranteed loyalty benefits but the guaranteed benefits differ company to company
  • Premium Payment Flexibility
Premium payment frequency is chosen by the person. It could be monthly, quarterly, half yearly or yearly

WHAT ARE THE TYPES OF CHILD INSURANCE AVAILABLE IN MARKET?

As we all are aware that different people have different financial needs in life, and to fulfil those needs there are different kinds of plans available in the market. Although you may find a different kind of Child Education Plan but maybe you will get confused by seeing a lot of plans under this category. But, the theme of these plans is divided into two types. They are as follows:
  1. ULIP PLANS
Also known as Unit Linked plans or Market Linked plans. And, as the name suggests these plans are linked to the market i.e. returns under these are high if the market is performing well and vice-versa i.e. returns will decrease if the market is not performing well. Generally, people who want to earn a higher rate of return and are ready to take risk invest in ULIP plans. As these plans work on the strategy of “Risk versus Reward” i.e. higher the risk is taken higher could be the rate of return. There are other features of these plans which are explained in the below section.
  1. ENDOWMENT PLANS
These are those kinds of plans which are not linked to market in any way and provide a stable return, which is not linked to the market. Returns under this plan are low due to the insurance component available, sometimes even less than Fixed Deposits. Generally, people who are not willing to take a risk and are happy earning a fixed rate of return opt for Endowment plans. Endowment Plans declare bonuses every year which gets added to the policy as a policy anniversary as a maturity benefit. On completion of 10 years, these policies also get some additional guaranteed education benefit. Maturity under these policies can also be received in instalment on completion of 18th year of child’s age until the completion of his education.

POINTS TO REMEMBER

  • Grace period
If policy holder has not paid the renewal premium before the due date then the policy will not lapse as you have 30 days grace period option. If the insured person dies during the 30 days grace period and has not paid the premium then also company will pay the benefits to the nominee after deducting the unpaid premium
  • Revival
Even if premium is not paid for two consecutive years, policy can be revived within 2years from date of first unpaid premium

WHAT IS THE TAX BENEFIT OF CHILD INSURANCE?

  • The premium paid under these policies will be deductible from your gross income up to the limit of INR 1.5 Lac under Section 80C
  • And, maturity received from these policies is also tax-free under Section 10(10D)
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