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Life InsuranceCommon Myths About Life Insurance in India
Even after being a highly important financial tool, there is still a lot of confusion, assumptions, outdated advice and second-hand opinions around life…
From providing good quality education, supporting their higher studies in a foreign country, to grandly celebrating their wedding, strong financial planning is required at each step. But since life is full of uncertainties, we can't simply rely on our savings. This is why you need a child term insurance plan. Not only does it ensure that the future financial needs of your child are well taken care of but it also protects your child if, unfortunately, something unexpected happens to you. A term insurance brings together the best of insurance protection and investment/savings benefits so that your child doesn't have to compromise with his/her dreams. It has answers to all your questions, like: The education costs are rising. How will I manage? What happens to my child if something happens to me? How can I save enough for each important milestone of my child? Investing in the right child term insurance gives you guaranteed future security, funds for education, covers marriage expenses and even offers financial independence to your child.
What is a Child Plan?
It's a unique and super beneficial insurance policy that is specially designed for parents who are constantly worried about how to secure their child's future financially. Don't see it as another insurance cover because it also works as a very dependable savings and investment tool.
How does it work?
- It starts when the parent buys an insurance policy in the name of their child.
- If the parent stays fine and outlives the policy term, they receive a maturity benefit. It's a sum that can be used for the education or wedding of their child.
- In case the parent passes away during the given term, the insurance company provides a death benefit that helps in supporting the needs of the child. In fact, some plans waive off any future premiums to be paid and continue till maturity. This way, the child doesn't lose out on the benefits.
- In short, you can rest assured that your child's financial future remains secured whether you are present or not. While this gives you peace of mind, this financial independence is also a gift to your child that grows over the years.
Types of Child Plans
With different types of term insurance plans available out there, you can choose the one that goes well with your goals and budget. Here we have some the major options:
Child ULIPs (Unit Linked Insurance Plans)
ULIPs are a profitable mix of insurance cover and market-linked investments. So, a part of your premium goes directly towards life insurance cover and the remaining is invested in different funds. This insurance plan is highly suitable for parents who are looking forward to growing wealth over the many years to come and are also okay with fluctuations in the market. Example: Let's say you invest in a Child ULIP when your kid is 4 years old. Now, by the time she turns 18, you would have sufficient returns that could help cover her overseas higher education.
Child Endowment Plans
These are traditional term insurance plans that provide guaranteed returns at maturity along with insurance protection for max benefits. Definitely safer than ULIPs, they do not depend on the stock market and hence their value is independent of market fluctuations. They are ideal for parents who avoid high risks and prefer certainty. Example: You will receive a lump sum payout for education purposes when your child will be entering college.
Single vs Regular Premium Plans
Single Premium Plan: In this, you pay the full premium amount at once when the policy starts. Regular Premium Plan: This one accepts monthly, quarterly or annual payments. You can always choose a plan that aligns with your financial convenience.
Money Back Child Plans
In this term insurance, parents get periodic payouts at specific intervals. Some amount is received during school admission, then college and then marriage. Since you don't have to wait for maturity, the plan is very helpful for dealing with the milestone-based expenses. Example: You get a certain sum when your child turns 10, next at 15 years and then at 20 years of age. This is how it keeps covering school, higher education and wedding expenses.
Why Buy a Child Term Insurance Plan?
- You also might think that saving in a bank account or investing in mutual funds would serve the purpose equally. But actually, it's not the same. Here's why:
- Rising Education Costs: The cost of higher education is increasing every year in India and abroad both. Courses that demand ₹10 lakh today may easily jump to like ₹25 lakh in the next 15 years or so. With child insurance plans, you can always stay ahead of inflation.
- Protection Against Life's Uncertainty: If at all something happens to the parent, the child's future will not go for a toss. A child term insurance ensures money is available for the child when needed.
- Disciplined Savings Habit: A plan gets you into committing to regular premium payments. You don't skip this "this time" and instead stick to the savings routine that adds up over time.
- Financial Independence for the Child: When your child gets financial support during all the important stages of their life, they won't have to depend on any relatives or loans.
Key Features of Child Insurance Plans
- It's the unique features of a child term insurance that make it stand out from any other savings options:
- Dual Benefit: The users enjoy the benefits of both insurance protection and return on investment.
- Death + Maturity Benefit: In case the parent dies, the child gets both a lump sum and a maturity benefit for their needs.
- Waiver of Premium: Upon the unfortunate death of the parent, the insurance company leaves all premiums to be paid. However, the policy doesn't stop.
- Investment Flexibility (ULIPs): As per your risk capacity, you can choose between equity, debt or balanced funds.
- Tax Benefits: Not only you can save tax on the premiums you pay, the money you get from the plan is also tax-free.
- Guaranteed Payouts: Whatever be the market conditions, some plans also offer the benefit of providing assured payouts at different stages of your child's life.
Factors to Consider When Choosing a Child Plan
- When you are buying the right child insurance plan, you need to carefully consider some very important factors like:
- Coverage Amount: Calculate the rough estimate of the cost of education, lifestyle and other needs 10-15 years down the line.
- Premium Affordability: The insurance plan shouldn't be burdening. You should be able to pay the premium comfortably in the long run.
- Policy Duration: The policy must align with your child's key milestones like higher studies and marriage.
- Risk Appetite: Go for the ULIP Child Plan if you are open to market risk and the Endowment Child Plan if you want guaranteed safety.
- Claim Settlement Ratio of Insurer: It's always better to pick insurance companies that pay term insurance claims quickly and reliably.
Advantages of Child Plans
- Unlike ordinary investments, a child insurance policy is designed to offer multiple advantages:
- Future Security: It is ensured that your child's future goals are not affected by any uncertainties.
- Long-Term Wealth Creation: The investment part of the policy helps your money grow into a bigger amount over the years.
- Dual Benefits: You get the benefits of insurance cover and investment returns in the same product.
- Tax Savings: You actually save on taxes while ensuring a secure future for your child.
- Peace of Mind: Parents have peace of mind knowing that they have ensured their child's financial independence.
Best Child Plans in India (2025)
- Here are some of the top child term insurance plans in India that are worth considering:
- LIC Jeevan Tarun: It offers flexible payouts during education years along with insurance protection.
- HDFC Life YoungStar Udaan: This insurance plan comes with savings, insurance and multiple benefits.
- ICICI Pru SmartKid: It's a ULIP-based child plan that is suitable for wealth creation over the years.
- SBI Life Smart Champ Insurance: A plan that offers sure shot benefits with the feature of waiver of premium.
- Max Life Shiksha Plus Super: A very good market-linked insurance plan that helps you save and invest for your child's education while financially protecting their future goals.
- Bajaj Allianz Young Assure: This one gives regular payouts at all important stages of your child's life like school education, higher studies and wedding while also keeping them financially protected.
- Each plan offers different benefits and hence, it's always good to compare before you finalize one.
- Your child's future is too precious; you simply can't leave it to chance. Education, healthcare and lifestyle costs are increasing quickly and a basic savings account won't be sufficient. With a child term insurance plan, funds will be available at the right time. With insurance, investment and savings combined, your child's dreams will never get compromised. At Policywings, we help you compare the best plans from leading insurers so you can secure your child's future with confidence.
Policywings Tip for Parents
Start a child plan within the first 2 years of your child's birth. The earlier you begin, the more time your money has to grow. Even Rs. 3,000-5,000 per month invested from age 0 can build a corpus of Rs. 25-40 lakh by the time your child turns 18. Always choose a plan with a premium waiver benefit so that if something happens to you, the policy continues and your child still gets the full maturity amount.
Child Plan Types Comparison
| Plan Type | Risk Level | Returns | Best For | Payout Structure |
|---|---|---|---|---|
| Child ULIP | Moderate to High | Market-linked (10-12% potential) | Long-term wealth creation | Lump sum at maturity |
| Child Endowment | Low | Guaranteed (5-7%) | Risk-averse parents | Lump sum at maturity + bonuses |
| Money-Back Child Plan | Low | Guaranteed periodic returns | Milestone-based expenses | Periodic payouts at set intervals |
| Single Premium Plan | Low to Moderate | Varies by plan type | Parents with surplus funds | Lump sum at maturity |
| Regular Premium Plan | Low to Moderate | Varies by plan type | Disciplined monthly savings | Lump sum at maturity |
1.At what age should I buy a child insurance plan?
It is best to buy a child insurance plan when your child is between 0 to 5 years old, as starting early gives more time for the investment to grow and accumulate a larger corpus. Some plans accept children from as young as 90 days old.
2.Can I choose the maturity date of a child plan?
Yes, most child plans allow you to choose the policy term so that maturity coincides with your child's key milestones like higher education at age 18 or marriage at age 25.
3.What happens to the child plan if the parent passes away?
If the parent passes away, most child plans waive all future premiums and the policy continues until maturity, ensuring the child receives the full benefit as planned. This premium waiver feature is one of the biggest advantages of child plans over regular savings.
4.Are child insurance plans eligible for tax benefits?
Yes, premiums paid for child insurance plans qualify for tax deduction under Section 80C up to Rs. 1.5 lakh per year, and the maturity proceeds are generally tax-free under Section 10(10D) of the Income Tax Act.
5.Can I buy multiple child plans for the same child?
Yes, you can buy multiple child insurance plans for the same child from different insurers to diversify your investment and ensure adequate coverage for different financial goals like education and marriage.
6.What is the difference between a child plan and a mutual fund SIP?
A child plan combines life insurance protection with investment, meaning your child gets the money even if you pass away. A mutual fund SIP offers potentially higher returns but has no life cover. Ideally, use both: a child plan for guaranteed security and SIPs for additional wealth creation.
7.How much should I invest in a child plan?
Calculate your child's future education and marriage costs with inflation (typically 8-10% per year in India). If you need Rs. 30 lakh in 18 years, you might need to invest Rs. 5,000-8,000 per month depending on expected returns. Use an online child plan calculator for precise numbers.
8.Can I withdraw money from a child plan before maturity?
Most child plans have a lock-in period (5 years for ULIPs). After the lock-in, some plans allow partial withdrawals. However, early surrender usually attracts charges and reduced payouts. It is better to stay invested for the full term.
9.What documents are needed to buy a child plan?
You will need the parent's identity proof (Aadhaar/PAN), address proof, income proof (salary slips or IT returns), child's birth certificate, and the parent's medical reports if required. Some plans may also need photographs of both parent and child.
10.Is a child plan better than a fixed deposit for my child's future?
A child plan offers dual benefits of insurance and investment that an FD cannot match. FDs give guaranteed but lower returns (5-7%) with no life cover. Child plans provide life protection plus potentially higher returns, especially with ULIPs. The premium waiver benefit alone makes child plans worth considering over plain FDs.
