What is a child insurance plan?
A child insurance plan combines insurance with a savings plan and secures your child’s future against financial constraints. As a parent, you want to ensure your child lives in comfort and receives the financial support necessary to reach their full potential in life. And achieving this goal requires careful financial planning.
Child savings plans are useful financial tools that help build an investment corpus. The fund helps meet the expenses for the major milestones in your child’s life. Moreover, in the case of an unfortunate event, your child receives the claim amount. It can cover education expenses and other living costs and enable them to fulfil their aspirations.
How does a child insurance plan work?
A child saving plan is a contract with insurance provider, with you as the policyholder and your child as the nominee.
First, you need to decide the cover amount you want your child to receive in case of an eventuality to enable them to live the life you want for them. Next, you have to determine the duration for which your child might need financial support. Provider will assign a premium amount accordingly. You can make a one-time, lump-sum payment or regular payments for the pre-specified period.
If an unwanted event occurs, insurance company pays the prearranged sum assured to your child. The mode of payment depends on your choice of the policy and payout. While some policies offer regular payouts as an alternative income source for your family, others may offer a lump sum payout.
The best investment plans for children also offer premium waivers in case of an unfortunate incident, whereby insurance company pays all future premiums and hands over the fund value at maturity to your nominee.
In case of survival until the end of the policy term, you will receive a sizeable amount as maturity benefit that can help you fulfil your child’s long-term goals.
What are the features and benefits of a child plan?
1. Sum assured:
This is the sum that your child will receive in case of an unforeseen event. You should select the sum based on the amount they will need to complete their education and live without any financial limitations.
2. Premium:
You need to pay this amount, based on the sum assured of you choose , for keeping the insurance in force.
3. Policy term:
It is the duration of financial cover, from the policy start date to the date of maturity. It depends on the time for which your child will need financial support.
4. Premium payment mode:
You can choose to pay the entire premium at one go or pay regular premiums on an annual, half-yearly, quarterly, or monthly basis as per your finances.
5. Maturity amount:
Insurance company pays this amount at the end of the policy term.
6. Premium waiver:
In case of your demise, the policy does not lapse. Insurance company continues to bear the remaining premiums until maturity. Your child receives the maturity value when the policy tenure ends.
7. Partial withdrawal:
If you invest in a unit-linked insurance policy for your child’s future benefits, you can withdraw parts of your fund value after five years.
Benefits of a Child Insurance Plan
Children’s savings plan offers a wide range of benefits, listed below:
1. Helps meet your children’s education cost:
Recent studies reveal that general education cost in India has undergone a fourfold hike. Also, professional course expenditures increased by 50% between 2007 and 2018. These numbers indicate that the price of higher education will skyrocket by the time your child attains the age for college admission. Regular investments in a children savings plan can help you amass the necessary funds to provide quality education to your children.
2. Covers the costs of medical treatments for your children:
Healthcare costs in India are increasing at twice the overall retail inflation rate. Hence, it is crucial to plan for unforeseen health complications. And the returns from your child plan policy can take care of the treatment costs, helping you provide adequate medical assistance to your child in health emergencies.
3. Acts as a shield against financial shortfalls even in your absence:
Proceeds from the child plan investment enable your child to complete their education pursue their career goals even if something unwanted happens.
4. Offers liquidity in cash crunches and provides for your child’s immediate needs:
You can raise funds in an emergency by taking loans against your child’s policy or liquidating part of the fund value.
5. Child plans provide tax benefits:
You can avail of deductions up to Rs. 1.5 lakhs from your taxable income under Section 80C of the Income Tax Act, 1961, for the premiums you pay towards your child insurance policy. The returns are also tax-exempt, provided the policy satisfies the regulations under 10(10D).
What are the eligibility criteria to buy a child plan?
Different policies have different eligibility requirements. The criteria are based on the following parameters:
- Age of the child at the time of purchase
- Your age at the time of buying the policy
- Age at maturity
- The minimum premium amount required
- Minimum policy term
Contact us to discuss your exact requirements and decide on the best investment plan for your child, matching your specific needs.
What are the documents necessary to buy a child plan?
- Duly-filled up policy form – You have to enter all your KYC details, age, gender, health conditions, and more. It is advisable not to withhold any information or furnish inaccurate data to avoid claim refusals in future.
- Address proof – You can use your passport/ Aadhaar Card/ electoral card/ utility bills/driving license/ bank passport to establish your residential address.
- Photo ID proof – Documents that you can use include PAN card, Aadhar card, driving license, voter card, passport, and the like.
- Income proof – As the policyholder, you have to show that you have the wherewithal to pay the premiums. You can use your bank statements for the past 6 months, Income Tax returns, salary statements, and other such financial papers for this purpose.
- Age proof – Since the premium amount depends on your age, you need to provide an age proof like birth certificate, passport, board exam certificate.
How does buying a child plan secure your child’s future?
- Offering a blend of investment and savings, a child insurance policy provides financial security when your children are dependent on your earnings. In case of an eventuality, the payouts safeguard their future.
- In case of an unfortunate incident, it offers the sum assured to your child, helping them meet their immediate needs and living costs.
- If you opt for the premium waiver benefit, Kotak Life continues paying the premiums in your behalf. At maturity, your child receives the policy-benefits that help them meet their financial needs.
- Encouraging disciplined, long-term savings, a child savings plan lets you build wealth for beating inflation, removing monetary constraints from your child’s goals like college education abroad or marriage.
What are the different types of child plans?
- Unit Linked Life Insurance Plan (ULIP):
A unit-linked child plan investment allows you to profit from capital market upswings. A part of your premium goes towards safeguarding your child’s future in case of contingencies. And the rest of your outlay is invested in the stock market. You can select a mix of equities and debt funds, or hybrid funds balancing the advantages of each asset class, according to your risk appetite. You can also switch your money among the different fund types based on the market outlook. ULIPs can thus help you generate an inflation-adjusted corpus.
- Savings plans:
These are traditional endowment insurance policies that assure capital protection through fixed, guaranteed returns. Kotak Life invests your money on your behalf and shares the revenues with you through bonuses and incentives, ensuring sizeable returns.
FAQs
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How can I buy insurance for my child?
Download application forms from the website and take the help of our expert representatives for a hassle-free application process. You can compare the premium amounts and benefits of different child insurance policies available online on our website to select the best child plan for your needs.
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What are child life coverage plans?
Child life coverage plans provide a predetermined lump-sum payout to the nominee in case of an unfortunate incident with the policyholder. In child plans, usually, the parent is the policyholder, and the child is the beneficiary. The claim amount can cover the child’s financial needs in the absence of the parent.
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Why should I buy a child insurance plan?
- Investment benefit: A child plan policy safeguards your child’s future against a lack of funds for their education and other critical life milestones.
- Insurance benefit: Apart from monetary assistance for better education, the payouts also provide the financials for your child’s day-to-day needs even if your earnings cease due to unanticipated incidents.
Hence, you should but child insurance to provide your child with the best in life even in adverse situations.
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What are child education insurance plans?
These insurance cum savings plans help you create the funds for your child’s higher education through systematic investments over time. With rising costs of education, ensuring quality schooling for your child needs robust financial planning. Education insurance plans offer lump-sum payments on maturity to cover your child’s tuition fees and other education-related expenses. Also, in case of an eventuality, the claim amounts ensure that your child’s learning continues unhindered, helping them pursue their career goals.
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Who should buy a child insurance plan?
Anyone who wants to build a corpus for future financial goals like paying for children’s education, marriage, helping them buy a car or property, or fund their travel goals, can invest in such insurance plans. Child investment plans also provide tax benefits under Section 80C and can be used as tax-savings tools.
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When is the right time to buy insurance for my child?
- Considering the average inflation rate, as your child grows up, living expenses and education costs are likely to escalate.
- Also, if they lose the support of your income due to the uncertainties of life, it might obstruct their career growth.
- Moreover, buying insurance at a young age can fetch lower premiums
Hence, you should start investing in child insurance early on. It will ensure your child receives the maturity benefits in time for their financial needs and safeguards them against economic distress in contingencies.
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What factors should I consider before buying a child insurance plan?
- Sum assured: on an amount that can cover your child’s education and living costs taking inflation into account.
- Policy term: Plan an investment horizon to coincide the payouts with the milestones in your child’s life like college admission, marriage, and more.
- Premium payment frequency: Select a payment mode, yearly, half-yearly, quarterly, or monthly, that suits your resources.
- Add-on benefits: Pick premium waiver options to ensure your child receives the policy benefits even if you cannot continue premium payment due to an unpredicted event. Also, consider other riders like accident coverage that can increase the financial protection for a nominal increase in the premium, safeguarding your child against every exigency.
- Insurer’s claim settlement ratio (CSR): Defining the company’s’ claim payment record, a high CSR over 95% assures of timely claim resolutions in hours of need.
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Will I get tax benefits with child insurance plans?
- Under Section 80C of the Income Tax Act, you can get tax deductions up to ₹1.5 lakhs per year from your gross income for the premiums you pay for your child insurance plan.
- The proceeds you or your nominee receives from the plan are also tax-exempt under Section 10 (10D).
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Why is a child insurance plan important for my child’s future?
- Education costs are increasing rapidly. A child insurance policy allows you to create sufficient funds for your child’s admission to premier institutes for higher education.
- It also acts as a safety net, providing them with the life cover amount in case of an unforeseen event, protecting them against financial hardships.
Hence, such plans are essential to ensure that your child receives the education they deserve and to secure a bright future for them.
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