Child Insurance Plan

February 18, 2011   ·   0 Comments

Lesson 9:

www.stockssavvy.comChildren Plan also referred as a Child Plan is a type of life insurance plan specially designed to meet the increasing educational and other financial needs of your child. The plan ensures complete freedom to your child with respect to finances in realizing his future dreams and goals. The insurance policy also provides risk cover on the life of your child.

Riders are the additional benefits added by paying a marginal additional premium. Riders may include Accident & Disability Benefit Rider (ADBR), Accident Benefit Rider (ABR), Critical Illness Benefit Rider (CIBR), Waiver of Premium Rider (WOPR), Income Benefit Rider (IBR), etc. Tax benefits can be enjoyed on riders.

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One needs to pay premium up to a predetermined term.

1)     If Proposer (In most cases parents) dies and if PWB* is taken (In most of the policies it comes by default) all the future premium will be waived, and child will continue to get all the benefit stated in the policy.

2)     If Child dies

a)     Before commencement of risk, Premium paid is returned

b)     After Commencement of risk, S.A or accumulated amount whichever is higher is paid to proposer and Policy gets terminated.

3) If every thing works fine, On Maturity Child will receive amount as stated in the Policy.

In a , normally risk commence after child completes 7 years or 5 policy years, whichever is later. These Child Policies pay Periodic amount so parent can use this amount to fund unforeseen expenses for child. Child Plan is ideal for you as it encourages you to save systematically and create a sufficiently large corpus for your child’s dream, be it higher education, set up a business or wedding.

Life Insurance policies offers a grace period of 30 days after the premium payment due date for paying the outstanding premium. If one fails to pay premium during the grace period, the policy lapses. You can revive your lapsed policy by paying your outstanding premium and certain amount of handling charges. This facility is available for six months. However, you can still revive the policy within 5 years from the date of issue of policy. But if you are applying for revival of your policy in this period, then shall entail submission of proof of good health and your premiums will be recalculated.

However, if your policy has been in force (in existence with all premiums paid on time) for three years and after that you fail to pay the premium, then your policy will get serviced out of your balance in your Accumulation Account. Every year the amount in this Accumulation Account will be used to covering your life (mortality charges and other expenses) will be deducted from your accumulated fund. This will continue till this fund has sufficient balance after which your policy will be terminated.

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Child Insurance Plans can be categorized into 3 Parts:

1)     Guaranteed Money Back Policies

2)     Endowment Policies

3)     ULIP Plans

We have Categorised few Popular Policies under which Category they fall

Child Traditional Endowment Policies (Guaranteed)

(1) Kotak Life Child Advantage Plan

(2) TATA AIG – Educare (18 yrs)

Child Traditional Endowment Policies (Non Guaranteed)

(1) Jeevan Kishore (LIC)

(2) HDFC Life Children’s Plan

(3) ING Vysya Creating Life (Endowment)

Child Traditional Moneyback Policies (Guaranteed)

(1) Met Bhavishya (Plan A)

(2) Met Bhavishya (Plan B)

(3) Komal Jeevan (LIC)

Child Traditional Moneyback Policies (Non Guaranteed)

(1) Jeevan Chhaya (LIC)

(2) ING Vysya Creating Life

Child Tradional Moneyback (Non Guaranteed with Bonus)

(1) Bajaj Allianz Childgain 21 plus

(2) Reliance Child Plan

Child ULIP Plans

(1) Dream Children’s Plan (Birla SunLife)

(2) Unit Plus Child Plan (SBI Life)

(3) Smartkid New Unit Linked (ICICI PruLife)

(4) Child Fortune Plus (LIC)

(5) Aviva Little Master

This time this Question Answer is Much Simpler. You know what we wrote about Money Back Policy or Endowment Policy or ULIP Plans in our Previous Lessons. In addition to that, what we feel about Child Insurance Plan.

If You are planning to have an Insurance when your Child has taken Birth or is very Young: If one is thinking of Buying Policy, when your Child has taken Birth or is very Young then Probably their Investment Frame is Larger i.e. more than 10 Years as they are thinking either Putting that Money either for Child Higher Education or For their Marriage etc, then the Combination of Term Insurance and Mutual Fund is the Way to Go. This way you’ll be covered for more Risk by Insurance & Mutual Funds will yield you more Corpus in the End too. In Addition to that, with Regular SIP, you’ll get additional Benefit of Insurance as Discussed in Mutual Fund Section – Funds which give Insurance Benefits as well.

If You are in need of an Insurance Term for Less than 10 Years: If your Child age is near 9-12, then Probably you need to have an Investment which is much More Fixed or Guaranteed. Probably for a Time Horizon of about 10 Years, 10 Year Bonds by SBI which Fetch an interest of About 9.5-10.0% looks Good(Only Prob is You need to Pay Income Tax on the Interest you will get for the Tenure) or Debt Mutual Funds(Funds on which you don’t need to Income Tax on the Interest- Covered Under Mutual Fund Step By Step Guide) can be Bought in as they Incorporate Rate of 10-12% will be the Perfect Choice.

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Rajesh Singla

Rajesh is the founder & CEO of Stockssavvy, Stocks analyst,financial advisor by choice,software engineer by fate,biker,gamer,cricket lover n enthusiastic person. He believes in doing things not just to get by but to get Ahead...

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