Child Life Insurance

Child life insurance helps you build financial security for your child’s future by combining protection and savings. Know the benefits, types, tips to choose, and how it works.
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3 min
04-September-2024

Child life insurance, often viewed as a prudent financial strategy, is more than just a policy; it's a promise of a secure future. For many Indian parents, the concept of life insurance for kids might seem unconventional. However, the benefits extend far beyond mere financial protection in unfortunate events. Getting a life insurance policy for your child can serve as a foundational step towards ensuring their financial independence and security.

This article delves into the nuances of child life insurance, its significance, and how it aids in building a robust financial future for your children. Whether you are contemplating getting life insurance for your kids or seeking detailed insights into various plans, this guide will provide you with a comprehensive understanding.

What is child life insurance plan?

A child life insurance plan is a policy specifically designed to provide financial security for children. It typically covers the child's life and accumulates a cash value that can be utilised for future financial needs, such as education, marriage, or even starting a business. These plans combine the elements of life insurance and investment, offering a dual benefit of protection and savings.

What are the different types of child insurance plans?

Understanding the different types of child insurance plans can help you make an informed decision. Here are the primary types available:

  • Child endowment plans: Endowment plans for child offer a lump sum amount upon maturity, which can be used for significant expenses like higher education. They provide both insurance coverage and savings benefits.
  • Child ULIPs (Unit Linked Insurance Plans): Child ULIPs are market-linked plans that invest in equities and debts. They offer higher returns compared to traditional plans but come with associated market risks. These plans are suitable for parents willing to take moderate risks for potentially higher gains.
  • Child term plans: These are pure protection plans similar to term insurance, offering a death cover if the policyholder passes away within the policy term. They are typically more affordable and provide substantial coverage.
  • Money-back plans: These plans provide periodic payouts at specific intervals, which can be used to meet various milestones in a child's life, such as education or extracurricular activities.
  • Single-premium child plans: In these plans, the policyholder pays a one-time premium, and the policy remains active for the duration of the term, providing coverage and benefits accordingly.

Key features of child insurance plan

A child life insurance plan is more than just protection — it’s a thoughtful investment in your child’s future. Let’s look at its standout features:

  • Dual benefit of insurance and savings: Child plans offer life cover along with a savings component to help build a financial cushion for your child’s future milestones.

  • Guaranteed maturity benefits: A lump sum is paid at the end of the policy term — often aligned with your child’s higher education or marriage timeline.

  • Waiver of premium option: In case the parent passes away, future premiums are waived but the policy continues — ensuring uninterrupted protection and savings.

  • Partial withdrawals: Many plans allow partial withdrawals after a few years, useful in case of emergencies or educational needs.

  • Flexible payouts: You can opt for a one-time maturity payout or staggered payments during important academic years.

  • Tax benefits: Premiums paid towards child life insurance plans are eligible for tax deductions under Section 80C.

  • Customisation through riders: You can enhance the policy with riders like critical illness, accidental death, or disability benefit.

Benefits of child insurance plans in life insurance

Getting a child insurance plans comes with a myriad of benefits:

  • Financial security: Ensures financial stability for the child in case of the untimely demise of the policyholder.
  • Goal-based savings: Helps in systematically saving for future financial goals like education, marriage, or setting up a business.
  • Tax benefits: Premiums paid towards child insurance plans qualify for tax deductions under Section 80C of the Income Tax Act.
  • Loan facility: Some policies allow you to take loans against the policy, providing financial support in times of need.
  • Waiver of premium: In the event of the policyholder's death, future premiums are waived off, ensuring that the child's financial goals are still met.

Why do you need a child education plan?

Raising a child today comes with rising costs and future uncertainties. A child education plan backed by child life insurance, offers peace of mind and financial stability. Here’s why it’s a smart move:

  • Secure their education goals: Quality education — especially in reputed institutions or abroad — can be expensive. A child plan ensures funds are available when needed, without financial stress.

  • Acts as a safety net: If the parent or guardian passes away, a child life insurance plan continues and pays out as planned. This guarantees your child’s dreams aren’t interrupted due to an unexpected loss.

  • Encourages disciplined savings: Life insurance for kids are structured to encourage long-term savings, helping you consistently invest towards your child’s future.

  • Covers medical emergencies or milestones: Some plans allow partial withdrawals or provide riders that help in medical emergencies, or even special achievements like higher studies, marriage, or setting up a business.

  • Takes care of inflation: With rising education costs every year, planning early through child life insurance ensures that you are not caught off-guard.

  • Boosts financial independence: Having a dedicated life insurance for kids helps the child become financially secure as they step into adulthood — especially useful for single parents or dual-income families.

  • Tax-efficient savings: The premiums and payouts from child plans usually enjoy tax benefits, making them a great dual-purpose product — investment + insurance.

  • Reduces financial pressure on parents: With a child plan in place, you don’t have to break savings or take loans during critical education phases.

How does child insurance plan work?

Child insurance plans work by combining the features of life insurance and investment. When you purchase a policy, you pay regular premiums which are invested by the insurance company. Over time, these investments grow and generate returns. In case of the policyholder's demise during the term, a death cover is paid to the beneficiary, ensuring the child's financial needs are met. Upon maturity, the accumulated amount is handed over to the policyholder, which can be used for the child's higher education, marriage, or other significant expenses.

When is the ideal timing to invest in child insurance plans?

Timing plays a crucial role in maximising the benefits of a child insurance plan. Here are some ideal moments to consider child insurance plan:

  • Early childhood: Getting a child insurance when the child is young maximises the time for fund accumulation, providing a substantial corpus by the time the child reaches adulthood.
  • Birth: Many parents opt to start a policy at birth, ensuring that the policy matures around the child's higher education period.
  • Milestones: Key life milestones such as starting school or just before entering high school can be strategic points to start a policy, aligning the maturity benefits with educational needs.

Tips to choose the right child insurance plans

Selecting the right plan requires careful consideration. Here are some tips to guide you:

  • Assess future needs: Estimate the future financial needs of your child, such as education and marriage, to choose a plan that aligns with these goals. If you are evaluating family-wide protection, it may be helpful to compare child insurance with options like term insurance for mother that cater to different roles within the household.
  • Compare plans: Compare different plans based on their features, benefits, and premium amounts. Use online comparison tools for detailed insights.
  • Check insurer’s reputation: Research the insurance company's claim settlement ratio and customer service reviews to ensure reliability.
  • Consider flexibility: Opt for plans that offer flexibility in premium payment terms, investment options, and withdrawal facilities.
  • Understand terms and conditions: Thoroughly read the policy document to understand the terms, conditions, exclusions, and any other fine print.

What are the common inclusions in child insurance plans?

Most child life insurance or life insurance for kids come with standard features that make them both protective and growth-oriented. Here’s what they typically include:

  • Life cover for the parent or earning guardian: The plan usually insures the parent but benefits the child financially.

  • Waiver of premium benefit: If the insured parent passes away, the insurer waives all future premiums while continuing the policy.

  • Guaranteed maturity and loyalty additions: These ensure a lump sum corpus for higher education or marriage goals.

  • Fund options in ULIP-based child plans: You get to choose low- to high-risk investment funds depending on your return expectations.

  • Tax benefits under 80C and 10(10D): Premiums and maturity proceeds are tax-exempt as per applicable laws.

What are the common exclusions in child insurance plans?

Understanding what is not covered under child insurance plans is essential:

  • Pre-existing conditions: Illnesses or medical conditions that existed before purchasing the policy are usually excluded.
  • Suicidal death: Policies typically do not cover death due to suicide within a specified period from the commencement of the policy.
  • Risky activities: Death or injury resulting from participating in hazardous activities or sports may not be covered.
  • Substance abuse: Claims arising from death due to alcohol or drug abuse are generally excluded.

What is the claim process for child insurance plan?

Filing a claim under a child insurance plan involves several steps:

  • Notification: Inform the insurance company about the event leading to the claim as soon as possible.
  • Documentation: Submit necessary documents such as the death certificate, policy document, and identification proofs to the insurer.
  • Claim form: Fill out the claim form provided by the insurer, detailing the cause of claim and other relevant information.
  • Verification: The insurer will verify the submitted documents and the claim's legitimacy through internal checks and possible external investigations.
  • Claim settlement: Once verified, the claim amount is processed and disbursed to the beneficiary as per the policy terms.

Pro Tip

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What are the documents required for getting child insurance plans and processing claims?

Having the right documentation is crucial for both purchasing and claiming a child insurance plan:

Documents required for child life insurance policy purchase

  • Identity proof: Aadhar card, PAN card, passport
  • Address proof: Utility bill, rental agreement, Aadhar card
  • Age proof: Birth certificate, school certificate
  • Income proof: Salary slips, income tax returns

Documents required for child life insurance claim processing

  • Death certificate: In case of a death claim
  • Policy document: Original policy document
  • Medical reports: If applicable
  • Identification proof: Aadhar card, PAN card of the claimant
  • Bank details: Bank passbook or cancelled cheque for fund transfer

Conclusion

Getting a child life insurance plan is a significant step towards securing your child's future. It offers a blend of protection and savings, ensuring that your child's financial needs are met even in your absence. By understanding the types of plans available, their benefits, and the intricacies involved in choosing the right plan, you can make an informed decision that aligns with your financial goals and aspirations for your child. Remember, the key to a robust financial future for your child lies in early planning, careful selection, and understanding the terms and conditions of the policy.

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Frequently asked questions

Which life insurance is good for a child?

A good life insurance policy for a child should offer a combination of protection and savings. It should provide a financial safety net, accumulate cash value over time, and include features like premium waiver and maturity benefits that align with future financial needs such as education and marriage.

Which is the best LIC policy for children?

The most suitable LIC policy for children typically offers a blend of life coverage and savings, catering to long-term financial goals. It should provide maturity benefits, regular payouts, and premium waiver options to ensure that the child’s future expenses like education and marriage are well-supported.

What is a child policy in life insurance?

A child policy in life insurance is a plan designed to provide financial security for children. It combines life insurance coverage with savings, ensuring funds for future expenses like education, marriage, or other significant milestones, and often includes benefits like premium waivers in case of the policyholder's death.

Which is the best insurance policy for the child's future?

The most suitable insurance policy for a child's future should offer a balance of life protection and investment growth. It should include features like regular payouts, maturity benefits, and premium waivers, ensuring that funds are available for key milestones like higher education and marriage, thereby securing the child's financial future.

Can child life insurance be used to fund education or marriage expenses?

Yes, absolutely. Child life insurance plans are designed to provide maturity payouts or staggered benefits that can be used for education, marriage, or other major life events.

Is child life insurance a good investment option?

Yes, it’s a smart long-term investment that combines life cover with systematic savings. It ensures financial security for your child even in your absence and helps meet major future goals.

What happens to the child life insurance policy if the parent passes away?

If the insured parent dies during the policy term, the waiver of premium benefit is activated. The insurer continues the policy, and the child receives the promised benefits at maturity or as scheduled.

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*T&C Apply - Bajaj Finance Limited (‘BFL’) is a registered corporate agent of third party insurance products of Bajaj Allianz Life Insurance Company Limited, HDFC Life Insurance Company Limited,  Life Insurance Corporation of India (LIC), Bajaj Allianz General Insurance Company Limited, SBI General Insurance Company Limited, ACKO General Insurance Company Limited, HDFC ERGO General Insurance Company, TATA AIG General Insurance Company Limited, ICICI Lombard General Insurance Company Limited, New India Assurance Limited, Chola MS General Insurance Company Limited, Zurich Kotak General Insurance Co. Limited , Star Health & Allied  Insurance Co. Limited, Care Health Insurance Company Limited,  Niva Bupa Health Insurance Company Limited , Aditya Birla Health Insurance Company Limited and Manipal Cigna Health Insurance Company Limited under the IRDAI composite CA registration number CA0101. Please note that, BFL does not underwrite the risk or act as an insurer. Your purchase of an insurance product is purely on a voluntary basis after your exercise of an independent due diligence on the suitability, viability of any insurance product. Any decision to purchase insurance product is solely at your own risk and responsibility and BFL shall not be liable for any loss or damage that any person may suffer, whether directly or indirectly. Please refer insurer's website for Policy Wordings. For more details on risk factors, terms and conditions and exclusions please read the product sales brochure carefully before concluding a sale. Tax benefits applicable if any, will be as per the prevailing tax laws. Tax laws are subject to change. BFL does NOT provide Tax/Investment advisory services. Please consult your advisors before proceeding to purchase an insurance product. Visitors are hereby informed that their information submitted on the website may also be shared with insurers. BFL is also a distributor of other third-party products from Assistance Services providers such as CPP Assistance Services Pvt. Ltd., Bajaj Finserv Health Ltd. etc. All product information such as premium, benefits, exclusions, sum insured, value added services, etc. are authentic and solely based on the information received from the respective insurance company or the respective Assistance service provider company.

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