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Planning does not necessarily mean about what you wish your child would grow up to be, or have certain characteristics, but it also essentially means you as a responsible parent having various obligations to fulfill that would help him to grow better in this world.

The dynamics of planning for the child's future have changed radically over the years. The conventional method of providing for the child was to just set aside some amount of money in a savings bank account. These funds would then be utilized for the child's life stages. A few parents would also make investments in fixed deposits with the intention of utilizing the maturity amount. However, it would be safe to say that such an approach is not only outdated, but also inadequate in the present scenario.

Life insurance plays an important role in an individual's financial planning exercise. Insurance can assist individuals in planning for their own life stages as well as provide for their child's future. It also secures the child’s future in case of any unfortunate event. Various types of child insurance products are available in the market today.

Child insurance plans have traditionally played an important role in securing the child's future. With a plethora of children insurance plans available in the market, it becomes difficult for most parents to evaluate them objectively. Individuals need to understand the dynamics for planning their children so that they can best utilize the alternatives available in the market.

Child plans come in two broad variants –Traditional child plans and unit linked insurance plans (ULIPs). The primary difference between the two lies in the way they invest their premium. Traditional plans invest a major portion of their money in debt instruments like corporate bonds and government securities (as specified by the regulator). Conversely, ULIPs can invest across equity and debt markets in varying proportions.


The factors to consider while planning :

  • Time frame for building a corpus.
  • Age at which the fund would be required.
  • Approximate amounts to build the corpus.
  • Investment avenues to be considered.
  • Approximate amounts to build the corpus.
  • Investment avenues to be considered.
  • The amount available to the child in case of death of parents or disability of the
  • premium-paying parent.

As a parent, one would generally plan from the perspective of making funds available for :

  • Education
  • Marriage
  • Seed capital for business
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Benefits
  • Insurance cum investment plan
  • Financial Security to your child's future
  • Financial support to prime moments of child's life
  • Addition of specific riders
  • Maturity Beenfits
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Frequently Asked Questions

You may not have adequate funding at the time of future events which are indispensable for any child, viz., admission fees for the child's higher education, fees for tuition and coaching, child's etc. In these situations if you have taken a child life insurance policy in advance can solve all your financial problems.

The child's parent or legal guardian or grandparent can buy the child life insurance

Child life plans provide cover for the child's parent/legal guardian/grandparent for a specified term. That is, if the parent, guardian, or grandparent were to pass on, the child's future is not put in jeopardy. In the event of such an occurrence, the child receives the Sum Assured in the policy plus bonus / participating profit/ guaranteed addition, if any, or the value of the investments, at a pre-determined age.

This money is receivable irrespective of whether the proposer i.e. the parent/legal guardian survives the term of the policy.

If the parent dies, the family gets the assured lump sum amount. But the policy doesn’t get terminated, it keeps continue with the insurance company paying the premium till the maturity. So in effect, your plan to create a corpus for your child remains intact.

In case of a child traditional money back policy, the child receives fixed portions of the sum assured at regular intervals. On maturity, the child receives the balance sum assured, if any, plus the bonus/participating profit/guaranteed addition, if any, or the value of investments, whichever is higher.

The claim amount is not automatically payable to you. You need to sign and send back a discharge form/voucher/claim form that is sent to you by the life insurance company (usually, sent more than a month before the date of maturity). Other formalities may vary from company to company.

Yes, the proceeds from a child life insurance policy are tax-free on maturity.

In the event of death of the insured during the term of the life insurance policy, the nominee has to intimate the life insurance company branch. Thereafter, a claim form has to be filled in and submitted to the office with the original policy documents and the death certificate.

This entire process could take up time; ranging from a few weeks to three to four months, if all the paperwork is in place. In case of complications, it could take much longer.

No. The death benefit is a tax-free sum of money paid to the nominee.

Although child life insurance policies are taken in order to ensure that the nominee receives the sum assured (and other benefits, such as riders, bonuses etc.) on the death of the insured, there are quite a number of typical circumstances in which death claims are not payable. Some of these are:

a) If the insured, whether sane or insane, commits suicide within 12 months from the date of issue of the policy or the date of any reinstatement of the policy.

b) If an individual's policy had lapsed due to non-payment of premiums and she/he makes up the payment backlog to bring the policy back in force. But two months later, she/he commits suicide. In this case, the insurer will not be liable to pay the death claim to the nominee.

c) If the insured has misrepresented the facts, usually pertaining to health conditions, at the time of entering the insurance contract.