Life and General Insurance

Child Plan is insurance cum investment plan that serves 2 purposes –

• To financially secure your child’s future

• To finance the turning points in his life such as higher education and marriage

 

So, like a double-edged sword, a Child Plan protects the future of your child in case of your unfortunate demise and at the same time, builds a corpus over a term to be utilized to finance the prime moments in his life like higher education and marriage.

 

Plans are designed to help you build a corpus that allows you to meet the major expenses of your child in future. Besides providing you life cover to ensure that your child’s dream is secured, they also offer you the choice of guaranteed returns or the flexibility to manage your fund options to make your money grow as per your needs. 

 

The key parameters to looked at are

 

Premium Amount- It more or less depends on the sum assured and maturity amount you choose.

 

Mode of Premium Payment –

 

• Regular premium- As the name implies, the premium is paid on a regular basis. This can be yearly, half yearly or even quarterly.

• Single premium - The premium is paid as a single payment.

 

Sum Assured -The thumb rule to follow is that the sum assured should be around 10 times your present income.

 

Policy Term - An ideal policy term for a child plan is the time you think your child needs to get on his feet. If your child is 10 years old, your policy term should be 12 years.

 

Maturity Amount - Sit with your financial advisor and take into account the inflation rate and other such factors, work out a maturity amount that you would require at the end of the policy term. Maturity amount can be received as a lump sum or in a frequent period of 5 years.

 

Waiver of Premium - This is a kind of rider that comes inbuilt in child plans. However, if this is not a part of the policy, it is always advisable to opt for the same. In case of death of the insured, this rider enables the policy to continue by waiving off the financial burden to pay the rest of the premium to the insurer.

 

Partial Withdrawals - Some parents prefer withdrawing chunks of maturity amount at pre-fixed intervals instead of getting a lump sum amount at one go. The intention to opt for this feature is to meet financial needs of a kid at key moments in his life.

 

Riders and Benefits - These are the add-ons that make your coverage financially and qualitatively more valuable -

 

• Premium Waiver Benefit

• Accidental Death and Disability Benefit

• Critical Illness Rider Benefit

 

 Types of Child Plans - Take Your Pick

 

• Child Endowment Plans - The premium flows into debt instruments, the decision of which is at the discretion of the insurance company. Return is decided by bonus payable on maturity.

• Child ULIPs - A fraction of the premium flows into debt instruments and the rest into equity instruments. The decision of switching between funds remains in hands of the insured. Since it's a market linked plan, the return is decided by the net value of the assets at the maturity period.