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How to compare the different features of child insurance plans?

Being a parent, you always feel responsible for your child’s wellbeing. You work hard to ensure that all their dreams are fulfilled, and they face no hardships in the way. However, with rising child expenses as well as cost of living, education, etc., your child’s future can be at risk. Therefore, investing in a child plan iscritical to ensure that your child’s aspirations are protected.

So what are child investment plans?

Child investment plans are insurance plans that provide your child with financial stability to meet expenses in the future. It works as a facilitator that allows your child to fulfil their dreams and aspirations such as higher education, extracurricular activities, marriage, etc., without any hindrance. A child plan also works as financial cushion, that protects your child from ramifications in the case of sudden death of a parent.

Now that you know what a child plan is, the question arises which one to get?

How to compare child investment plans?

Once you have decided on an estimate you are looking to insure for your child, you need to start contributing to a child insurance plan in your child’s name. The parameters you should consider to compare between the different child investment plans are as follow-

  • Choice of funds-

 

Child investment plans are of two types- ULIP based child plans or Endowment based child plans. If you opt for the former, you can choose between debt, equity or hybrid investment options. While being risky, as investing in stocks is involved, ULIP based child plans can earn higher returns than endowment based plans. This is because in the case of endowment based child plans, the premium is invested in debt instruments and the profits earned are paid by the insurer. Therefore, it is important to ascertain your risk capacity before choosing a child plan.

  • Option for Premium Payment-

In some child plans, the premium amount is required to be paid as a lump sum at the time of inception of the policy. Other plans present the option to pay it on a regular basis, frequently, such as monthly, quarterly, half-yearly and yearly. Evaluate which one works best for you.

  • Option for sum insured-

Some policies have the provision that in the case of the sudden demise of the insured person, the insurer is required to pay the sum assured. It would be wise, in such a case, to select a sum insured that is significantly more than your current gross income.

  • Check the policy tenure

While most child insurance plans are designed to cater to children between 18 to 21 years of age, you can decide on the stipulated age frame until which you are looking to insure your child. However, keep in mind that the age of the policyholder should not be more than 70 years.

  • Amount at the time of maturity

In order to ensure that the sum at maturity doesn’t fall short of the financial requirements of the future, take into account interest rates and inflation while calculating the sum insured using a child plan calculator. Therefore, it is wise to refrain from investing in single premium plans, which may not yield suitable maturity benefits.

  • Option for segmented pay-outs-

Based on the type of pay-out you would need for the future, lump sum or yearly instalments, you can choose your preferred child plan. 

  • Riders benefits

While purchasing a child plan, check if the riders benefits such as waiver of premium, critical illness cover, disability cover, and accidental death cover are offered with the basic child plan itself or need to purchase as add-ons.

  • Clause for partial withdrawal

This is a special clause of partial liquidity; whereby in the case of a financial emergency, you can opt to partially withdraw from the sum insured.

  • Policy waiver benefit

Look out for child investment plans that offer a premium waiver benefit. This is a special provision whereby, in the case of sudden death of the policy holder, the insurer waives off future premiums. The corpus is allowed to grow till maturity after which is paid to the child.

With sound understanding of the various parameters, you can better evaluate various investment plan options. Depending on your risks and the plans you have for your child, you can then invest in a suitable child plan that takes into consideration all your expectations and offers your child the much-required financial protection in the future.

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