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What is a Child Money Back Plan, and How Does it Work?

A Child Money Back Plan is a type of life insurance policy that is designed to financially protect a child's future. Read ahead to know more.

  • Mar 29, 2023

Key takeaways

  • Child money-back plans work by combining life insurance coverage with a savings plan.
  • They offer guaranteed returns, which means that you will receive a fixed sum of money on maturity.
  • These plans provide regular income in the form of payouts.

As the educational landscape is evolving at an unprecedented pace, and so are the requirements of growing children, it is of utmost significance to cater to their ever-evolving needs. This is where child money-back plans come into the picture. These types of child insurance plans provide a life cover as well as other advantages that assist you in safeguarding the future of your offspring.

So, what exactly is a child money-back plan, and how does it function? Let’s explore this further.

What is a Child Money-Back Plan?

A child money-back plan is a type of insurance policy designed to help parents save and invest money for their child’s future. This plan offers financial protection to the child in case of the untimely death of the parent or legal guardian while also providing regular payouts at specific intervals to support the child’s education, marriage, or other important life events.

Child money-back policy offers several benefits, such as the guarantee of a certain amount of money for the child’s future, financial protection in case of the parent’s death or disability, and tax benefits.

How Does Child Money-Back Plan Work?

Child money-back plans work by combining life insurance coverage with a savings plan. The policyholder pays regular premiums, which are invested in a fund managed by the insurance company. Over time, the fund grows, and the policy accumulates a cash value. This cash value is paid out periodically as a form of savings or investment.

The policyholder can choose the term of the policy, which typically ranges from 10 to 25 years. At the end of the term, the policyholder receives a lump sum payout, which can be used to fund their child’s education or other expenses.

The policyholder can also choose to add riders to the policy, such as a waiver of premium rider, which allows them to skip premium payments if they become disabled or critically ill. They can also add a term rider, which provides additional life insurance coverage for a set period.

Benefits of Child Money-Back Plans

As parents, you want the best for your child, and securing their future is a top priority. One way to do this is by investing in a child money-back policy. These plans are designed to provide financial protection and growth to children while also offering several other benefits. Here are some of the benefits of child money-back plans.

Guaranteed Returns

Child money-back plans offer guaranteed returns, which means that you will receive a fixed sum of money on maturity. This makes them a safe and secure investment option, especially for risk-averse investors. The guaranteed returns ensure that your child’s future is secured, and you don’t have to worry about market fluctuations.

Tax Benefits

These plans offer tax benefits under Section 80C of the Income Tax Act. This means that the premium paid towards the plan is tax-deductible up to a maximum limit of ₹1.5 lakh per year. Additionally, the maturity amount is also tax-free, which means that you don’t have to pay any taxes on the returns earned.


These plans offer flexibility in terms of premium payment and payout options. You can choose to pay the premium annually, half-yearly, or monthly, depending on your convenience. You can also choose the payout option based on your child’s needs. For example, you can opt for a lump-sum payout on maturity, or you can choose to receive regular payouts to meet your child’s educational expenses.

Additional Riders

Child money-back plans come with additional riders that can enhance the policy’s coverage. These riders include critical illness riders, accidental death riders, and waiver of premium riders. By opting for these riders, you can ensure that your child is protected against unforeseen events.

Features of Child Money-Back Plans

Child money-back plans are investment plans that offer financial security for your child’s future needs. These plans not only provide life insurance coverage but also offer regular payouts to the policyholder at fixed intervals throughout the policy term. In case of the unfortunate death of the policyholder, the plan also guarantees a lump sum amount to the nominee. Here are the key features of Child money-back plans.

Regular Payouts

One of the most significant features of the Child money-back policy is that they offer regular payouts at fixed intervals throughout the policy term. These payouts can be useful for meeting your child’s educational expenses, marriage expenses, or any other financial needs that may arise during the policy term. The payouts are usually a percentage of the sum assured and are paid out every few years.

Life Insurance Coverage

Child money-back plans also offer life insurance coverage, which is important for the financial security of your family. In case of the policyholder’s untimely demise, the plan guarantees a lump sum amount to the nominee, which can help them take care of the family’s financial needs.


Some Child money-back plans offer bonuses, which are additional payouts that policyholders receive along with the regular payouts. The bonus is usually a percentage of the sum assured and is added to the policy value.

Wrapping Up

These plans typically come with a premium payment term and a policy term, and in the event of the death of the policyholder, the plan provides a lump sum payment to the nominee.

Lastly, a child money-back plan can be a useful tool for parents or guardians to ensure that their child’s financial future is secure. By providing a regular payout and a lump sum payment in case of the policyholder’s untimely demise, these plans can help provide financial stability and security to the child even after the policyholder’s demise.

In this policy, the investment risk in the investment portfolio is borne by the policyholder.

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