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Benefits of a Child Insurance Plan
A child insurance plan is a financial product that integrates both insurance coverage and investment opportunities. In the event of the policyholder's death (typically the parent), the child receives a lump sum payout. Additionally, the plan provides periodic payments until maturity. For a comprehensive understanding of the advantages offered by a child insurance plan, please carefully review the following article.
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Benefits of Child Insurance
Table of Content
Every parent is highly conscious of their child’s future. Parents are worried about the health, education, and marriage of their children. To deal with the expenses, they often invest in different financial products such as saving schemes, FDs, life insurance plans, etc. However, a child insurance plan is one of the best options to secure your child’s future.
The child insurance plan is a type of financial product which combines both insurance coverage and investment. The child gets a lumpsum payout in case the policyholder (usually the parent) passes away and period payments till maturity.
If you want to learn about the benefits of a child insurance plan in detail, read the below portion carefully.
The Benefits of a Child Insurance Plan
If you want to save for your child’s future, a child insurance plan is an ideal investment option. Here are some other benefits of a child insurance plan in India of this investment that you should know:
Unexpected Loss of Parents
In case the parent (policyholder) passes away while paying the premiums, the insurer waives all future premiums.
The death benefit helps to cover your family's living expenses, outstanding debts, and your child's future educational and medical costs. Also, the child insurance plan remains active until maturity to ensure the continuous growth of your investment.
Tax Benefits
The benefits of a child insurance plan include tax benefits, which means that both your investment amount and maturity balance are tax-exempt. The total annual premium you are paying in this scheme is tax-deductible under Section 80C of the Income Tax Act, 1961#, and the maximum limit is Rs. 1.5 lakh every year. Additionally, you can avail tax exemption on maturity and death benefits under Section 10(10D)#.
No Loss to Principal Investment
There are different investment plans that may depreciate in terms of value or provide unpredictable returns depending on market conditions. However, a children's insurance plan protects your principal amount and guarantees a return on your investment. As a result, your child's future is completely secured.
Educational Support
Most child insurance plans are designed to pay for your child's educational fees, among other expenses. But, if your main focus is your child's education, you should choose a plan from an insurer that specifically focuses on your child's educational expenses.
The education expenses include several costs such as tuition fees, hostel fees, books & stationery fees, etc. You can reduce your financial burden by investing in this scheme and in future your investment will provide financial support for your child.
Achieving Future Goals
Child Insurance is a type of long-term investment that provides a maturity benefit when your child’s age becomes 17 or 18 (especially when your child is about to start college life). Some plans also provide periodic payouts at different stages of your child’s life.
If your child doesn't choose the money on higher education, the maturity amount can be useful for individual or family purposes.
Cultivating a Habit of Saving
Besides the benefits of life insurance, investing in a child insurance plan can help to build an investment mindset in your child. From a younger age, your child realises the importance of regular savings. It makes him/her understand the need for future planning and also helps to build wiser financial habits.
Your investment in child insurance sets an example for your child because they learn more from your actions as compared to your words. As a parent, if you have a saving mentality, your child will also follow your habits and such a good mentality will help to build disciplined financial behaviour.
Using Insurance as Collateral for a Loan
Your child's insurance plan can be used as collateral to get secured loans at a relatively low interest rate. The loan amount granted depends on your policy’s surrender value. You can use this to get a loan for your child’s education, marriage or any other requirements related to your child.
The loan facility is one of the best advantages of child insurance plans which are helpful in case you are in an emergency and need some cash urgently.
Benefits of a Matured Policy
Once your policy matures, the insurer will disburse your principal amount and additional returns. If you pay all of your premiums properly, you will get your maturity amount on time. As mentioned earlier, your investment and the maturity amount are tax-exempt.
Benefits of a Partially Matured Policy
Even if partially matured, a child insurance plan allows you to get a portion of the policy’s maturity benefits. If there is a sudden need, you can withdraw a part or full portion of your investment amount. But, for premature withdrawals, there may be some deductions.
Protection for Serious Illnesses
Another benefit of a child insurance plan is the health coverage for your child. Health coverage includes several costs, such as dental coverage, illnesses, accidents, implant costs, operation costs, etc. However, the actual coverages depend on the terms of the particular policy you will choose.
FAQs on benefits of child insurance
1. What are the benefits of a child policy?
Benefits of a child insurance plan in India include the coverage of future expenses for your child's health, education, marriage, etc. It also includes life insurance coverage for the policy payer, along with tax benefits on both the principal and maturity amounts. You don't have to pay taxes on the returns you get from this type of policy.
2. What is the main purpose of a child insurance plan?
A child insurance plan focuses on providing financial support to a child in the absence of his or her parents. The main focus is to reduce your financial burden for your child’s future. The investment amount matures at 17 or 18 or during the time of college education.
3. What is the use of child protection policy?
Child protection policy provides financial support for important events of your child such as health, education, marriage etc. The life cover of the premium payer also safeguards the family in case the earning member passes away.
4. Who is eligible for child insurance?
You can buy child insurance for your children if his/her age is between 0 (newborn) and 15 years. There may be some other eligibility criteria that may vary depending on the insurance company and individual policy.
5. How do I claim child insurance?
When the policy matures, the insurance company will reach you to settle the maturity amount. You have to fill out the bank discharge form with the bank details, and the insurer will settle it as soon as possible.
If you want to settle a claim before maturity, you have to contact the insurance company first. As per instruction, you have to fill out the claim form along with the required documents. After verification of the documents and your request, they will settle your premature claim.
Summary
Hopefully, at this point, you have the required information about the benefits of a child insurance plan. Children’s insurance plans combine the advantages of a life insurance policy and investments like ULIP plans. They also provide you with peace of mind that your children’s future will be secured. It is an ideal investment to support a family when they face any unexpected incidents for the loss of an earning member and no one is present to support them financially.
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- 4 Best Ways to Secure Your Child Education & Financial Future in 2024
- Know How to Save and Invest for Your Child's Education in 2022
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Francis Rodrigues
Francis Rodrigues has a decade long experience in the insurance sector, and as SVP, E-Commerce and Digital Marketing, HDFC Life, manages the online sales channel, as well as digital and performance marketing. He has had hands-on experience in setting up sales channels and functional teams from scratch over a career spanning 2 decades.
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Vishal Subharwal
Vishal Subharwal heads the Strategy, Marketing, E-Commerce, Digital Business & Sustainability initiatives at HDFC Life. He is responsible for crafting and ensuring successful implementation of the overall organisation strategy.
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