Tax Benefits On Child Insurance Plans
Updated On Jul 28, 2022
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The protection of your children's future comes only from the child plan of life insurance companies. Life insurance not only helps you create a future corpus for these goals, it also assures financial protection in case of sudden demise of the parent.
These are life insurance plans which help you achieve these twin objectives – Corpus building for the future expenses and protection of life. Child insurance is one such insurance plan which provides the dual benefits of insurance and investment into one. As a parent you can buy a child plan when the child is very young.
Child insurance plans are regular life insurance plans with an added benefit called the 'Waiver of Premium'. This benefit states that if the parent, whose life is insured under the plan, dies prematurely within tenure of the plan, the death benefits are paid to the nominee or beneficiary immediately. Also, unlike other life insurance plans it does not get terminated after the death benefit is paid out as the plan continues to run till the end of the tenure without the future premiums to be paid.
Tax Benefits on Child Insurance Plans
We have seen how the child plan of life insurance companies takes care of the various financial goals of the child and also how it protects the financial future in case of sudden demise of the parent. But, did you know that while the child plan protects the future of your child, it also provides insurance tax benefits which save taxes for you. Let us now see what are the benefits of taking a child plan?
- Benefits under Section 80C of The Income Tax Act 1961 – the unique Insurance tax benefits of having a child plan is that you can avail tax benefits of upto Rs 150,000 per year, under Section 80C of the Income Tax Act 1961.Therefore, you can save upto Rs 45,000 (assuming you are in the highest tax bracket of 30%) in a year on the premium paid on the child insurance plan.
- Section 10 (10D) of The Income Tax Act – The other insurance tax benefits are available on maturity proceeds received by you or your child or the nominee (in case of your sudden death). The maturity proceeds are also tax free under Section 10 (10D) of The Income Tax Act. Therefore, a child insurance plan is one of the few saving products, proceeds of which are completely tax free in the hands of the recipients.
Conclusion
We have many goals in life but protecting the future of our child is the utmost one. We have discussed how child insurance plans help you meet these goals when you are around and also protect the children in case of any uncertainties on your sudden demise.
The child plan continues even after the death of the parent without paying any premium and pays the sum assured amount and other benefits again on maturity of the policy or in a staggered manner as chosen by you. Thus, there is no such existing plan that can compete with or match the benefits provided by a child insurance policy as far as protecting the financial future and bringing up the child the right way is concerned.
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