Inclusions And Exclusions In Child Insurance Plans
Updated On Jul 26, 2022
Table of Contents
A child insurance plan is an investment cum insurance plan that offers financial safety of your child’s future by creating a corpus over a period of time. On maturity, child plan pays a lump-sum amount which can be used for your child’s higher education fees and marriage expenses.
While you are building the corpus to fulfil these goals for your child, the insurance plan provides a safety cushion to the corpus in case of your untimely demise. In the unfortunate event of your passing away before fulfilling the goal, the plan can invest the money on your behalf and give the maturity amount you originally aimed for your child.
Thus, child insurance plans are part of broader child-specific financial products, which also include child education plans. Child insurance plans are a mix of insurance and investment products, which ensure the financial security of your child’s future. These plans pay the life cover as a lump-sum amount at the end of the policy term.
Inclusion of Child Insurance Plans
Life Cover
Life cover is an integral part of most investment plans from life insurers. Child insurance plan also includes a cover on the life of the policyholder. This life cover will protect the child’s dream in case anything happens to the policyholder during the term of the policy.
Goal Protection from Death or Disability
Child 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 her 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 plans and unit-linked plans offer rewards for staying invested for 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 policy.
Avail Loans & Partial Withdrawals
Child endowment and money back 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 five years of the lock-in period.
Riders
Child insurance plans come with a variety of riders. The most prominent add-ons offered with child 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. 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 insurance policy is invested in market-linked assets. The insurance company provides the policyholder with an option to choose from different funds. The funds invest in equity, debt or money market instruments.
Premium Waiver Benefit
An important feature of 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.
Lump Sum Benefit
After your death, the death benefit is provided in a lump sum, i.e., the whole amount in a single payment. This can be used to pay off any debts or loans you left unfulfilled.
Exclusions
The insurance company does not provide coverage in case of death occurring under certain circumstances. These are called exclusions. Here is the list of exclusions for child plans.
- Suicide or self harm: The nominee does not get any claim amount if the death occurs due to suicide within 1 year of taking the policy
- Participation in adventurous or risky sports: In case the policyholder happens to knowingly participate in these sports, such as racing, rock climbing, skydiving, etc. That leads to death, the insurer does not entertain any claim
- Alcohol or drug abuse: If the insured dies due to alcohol or drug overdose, the nominee does not get any benefit
- Accident due to driving under influence of drug/alcohol: In case the death of the policyholder occurs during an accident while driving under the influence of alcohol or any kind of drug, there is no scope of getting any benefit
- Criminal activities: Any illegal activity or acts of war or criminal activity leading to death rules out any claim benefit
Conclusion
For the premium payment of child plans, customers are provided with two types of premium payment mode, namely online and offline. In online mode, customers can pay the premium amount through Debit Card, Credit Card, Net Banking and others. On the other hand through offline mode customers are required to pay the premium amount through cash.
