Eligibity Criteria For Buying Child Plans In India

Updated On Jul 21, 2022

Types of Child Plans
- Eligibility Criteria
How Child Plan Functions?
Conclusion

A child plan is a type of life insurance that helps financially secure the future of your child. It gives the assurance that the child will get the financial support from the insurance even if something untoward happens to the parents. A child insurance plan offers life cover and provides flexible payouts during crucial milestones of your child’s life. Moreover, some of the best child plans are designed keeping in mind the fact that life is unpredictable. It helps to build a corpus, which will help the parents manage major expenses related to children like higher education. This corpus can be used even during unfortunate incidents like untimely demise of parents.

Types of Child Plans

Child plans in India are of 2 types – traditional plans and Unit Linked Insurance Plans (ULIPs). Traditional insurance plans can be endowment or whole life insurance plans. These are a mix of insurance and savings. Traditional plans come without risks and they provide fixed returns. On the other hand, ULIPs are a combination of protection and investment and come with risks because the investment is done in market-linked funds.

Eligibility Criteria

The eligibility to buy a child plan varies from company to company. The usual entry age to buy a child plan is 18 to 21 years, and the maturity age can be up to 60 to 65 years.

The sum assured also varies according to the plan. While some plans have no minimum criteria, others have criteria of at least 5 to 10 times of the annual premium amount. This means that if the annual premium is Rs 30,000, the sum assured is approximately Rs. 3 lakh.

How Child Plan Functions?

Let us look at the basic working of child plans:

Child Plans are generally designed to serve two purposes together – of an insurance product and of an investment tool. The product provides financial security to your child at all crucial stages of his/her life
If you buy the plan, you will be the policyholder, while your child will be the nominee. However, in your absence, the insurance component ensures that your child, being the nominee, receives a substantial amount of money to be able to manage his/her finances seamlessly
Talking about the investment component, it helps to build a substantial fund to accumulate enough money to meet the necessary expenses in future like travelling abroad for higher education, getting admission and paying fees for a university abroad, marriage or setting up his/her own business.
With guaranteed financial stability, the parents will be able to concentrate on other aspects of their child’s growth and development.

Conclusion

With child plans you can claim deductions in tax under Section 80C of the Income Tax Act. Also, you can claim tax exemptions under Section 10(10D) on the returns you get. Here, if the premium paid in any year does not exceed one-tenth of the basic sum assured, you can claim tax exemption for interest earned on the investment.

Disclaimer

This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.