Things You Must Know About Child Insurance Plans
Updated On Apr 26, 2021
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Child insurance plans provide all parents an opportunity to contribute and build up a stable financial future for their children. In today’s world, a financial boost to a growing child is infinitely valuable. It becomes even more important in case you cannot be there to provide for your child. To prepare against such uncertainties, you must purchase a child insurance plan as soon as possible.
Read More: Top Reasons To Buy A Child Insurance Plan
It is always best to be aware of all the nuances of an insurance plan, before purchasing it. Such is the case for child insurance plans too. To help you do this, we have compiled 4 things that you should know about child insurance plans. Here they are:
Types of Child Insurance Plans
There are two types of child insurance plans that are currently available. However, most people remain unaware of this. Here are the two types of child insurance plans that are available:
1. Child ULIPs
Child ULIPs invest a part of the premiums paid, into market-linked funds. The choice of the fund is up to the policyholder and the returns depend on market trends.
2. Child Endowment Plans
Under child endowment plans, the returns are lump-sum payouts in case of death or maturity. The premium is invested in debt or equity funds by the insurance company itself.
Do Read: Child Plans Myths Busted
Benefits of Child Plans
Following are some of the key benefits offered by child plans -
1. Children’s Fund Creation
A growing child has multiple financial needs that require attention from time to time. In case you feel like an end lump sum may not be sufficient for these continuous needs, child insurance plans let you create a children’s fund that will payout regular amounts to your child.
2. Partial Withdrawals
In the case of most insurance plans, a partial withdrawal in the middle of the policy term is not allowed and is even penalized in some cases. However, in the case of child insurance plans, partial withdrawals are allowed.
3. Choice of Payouts
With a child insurance plan, you also get flexibility in terms of payouts. You can either opt for lump sums or regular instalment payouts. Lump sums are great if your financial aims consist of large costs but a regular instalment might be a more sustainable option in the long run.
4. Waiver of Premium Benefit
Child Life Insurance plans usually come along with a ‘Waiver of Premium’ benefit where, in case the life assured i.e. the parent of the child passes away during the policy term, then all the future payable premiums gets waived off and the policy continues. This way you can ensure your child has enough financial resources to fulfill their goals.
5. Tax Benefits
Premiums paid for child life insurance plans qualify for tax exemption under Section 80C of Income Tax Act, 1961. Maturity Benefit which is receivable under child life insurance plans also qualify for tax exemption under Section 10(10D) of Income Tax Act, 1961.
Also Check: Tips To Purchase Child Plan