It is necessary to compare child plans and buy an ideal one from numerous child policies in the market – each having its own Unique Selling Propositions (USP).
For instance, many endowment child plans provide survival benefits in installments that allow parents to fund expenses during various stages of the child’s years in education.
Some provide lump-sum Maturity benefit as well to allow guardians to meet the child’s expenses when the child finishes studies and plans to get married or buy an apartment. There are child health plans which provide useful funds in case the child suffers from a critical illness.
However, you also need to plan your expenses regarding the payment of the premium. A profitable child plan would naturally incur a high premium. ULIP child plans may have Risk undertakings that you may not like to accept.
On the other hand, useful riders, such as Premium waiver, Accident benefits, and many more sops may be really useful in the bargain.
Let’s check out the types of child plans available in the market and what one should do in order to compare the child plans and decide the ideal one for the child’s future:
Types of Child Insurance Plans Available in India
Life Insurance Child Plans
These child plans offer Risk Cover for the Life Insured – who is generally the parent. The nominee is the child who gets the benefit of the parent who dies during the policy term.
These plans have Tax Benefits and Assured benefits. On maturity, a life insurance endowment child plan would allow maturity benefit which can be used for the future of the child.
Child Money-Back Plans
In these plans, the child is the Life Assured and not the parent. The Sum Assured is given back as Survival Benefit at the end of certain years in the policy Term period.
Death Benefit is paid to the Beneficiary, generally the parents. There may be guaranteed returns, vested bonuses, and Loyalty Additions provided in some child money-back plans.
ULIP-Based Child Plans
These child plans are unit-linked child insurance plans where there is risk protection, guaranteed returns during maturity, and non-guaranteed fund value. The plans are based on the performance of the capital market.
As such, an upswing would generate high fund value through various fund value investment options offered to the policyholder. A downswing, on the other hand, would incur a loss.
There may be a family-income benefit provided to the child in case he or she loses one of the parents. The child would also get an automatic premium waiver option.
What is covered?
Child plans have been designed in a way to ensure that the child has adequate funds for meeting the expenses needed for secondary education, higher education or research work, marriage, or buying immovable commodities, such as an apartment.
Child Health Insurance plans take care of expenses on hospitalization, pre-surgery or post-surgery tests, recuperation benefits, and miscellaneous benefits
Often, a child policy with surrender value, loan option, tax relief on various benefits, and useful Riders on accident, critical illness, and premium waiver are additional benefits one can get.
Child plans can be gifted by relatives. Some child plans for challenged kids have Annuity options as well. These plans help to protect a child’s financial obligations in the future.
What to Compare?
When comparing a child plans, ensure that you consider the minimum and maximum Age Limit of the child, amount of sum assured and premium payment term or annual premium payment for the same, minimum premium option, policy term period benefits vis-Ã -vis premium provided to the insurer, riders, and miscellaneous benefits.
If you are planning for a ULIP plan, compare child benefits in relation to funding allocation charges, other charges, and premium to be paid for the same. Don’t forget that you can avail riders only when you pay an extra charge for them.