Insurance For Children: Is Life Insurance Necessary for a Child?

A Child Insurance plan is a two-pronged tool that works as both an insurance and investment tool to protect your child's future. It also gives flexibility to assist your child in achieving critical educational milestones.

Child Life Insurance policies are designed to offer financial security and long-term savings for your children. These policies provide a combination of protection and investment benefits. Child policies have a fixed term, and the sum assured is paid out to you either on the maturity of the policy or to the nominee (child) in the event of the policyholder's (parent) demise. These policies help you, as parents, save for your child's future expenses like education, marriage, or any other financial needs. They also offer a life cover to guarantee financial stability for your child if you are not around.

In the aftermath of the pandemic, inflation rates have soared dramatically. This rise in costs across the board means that your current monthly savings might not suffice to cover the escalating expenses of higher education in the future. You want your child to thrive in the competitive environment and ensure that you have no financial constraints. Child Insurance plans offer you the flexibility to invest based on your child's needs, like education, health, and other monetary goals.Many plans provide a life cover extending to about ten times the annual premium. A Child Insurance plan can also permit partial withdrawal when necessary. Additionally, you can avail of tax benefits for premiums paid annually.Also read: Looking for Child Investment Plan in India? 7 Top Options You Can Consider

Insurance for children is also a type of investment. They can help you meet your goals to secure your child's expenses. Here are some of the advantages of purchasing a Child Insurance Plan.

Funds for a child's education:

Child life insurance plans can help you accumulate funds for higher education expenses and other significant events like marriage. The plan considers inflation and offers benefits on the total premium paid over the policy tenure on maturity.

Liquidity during a medical emergency:

Children's Insurance plans in India offer partial withdrawal, allowing you to access funds during medical emergencies if your child requires hospitalisation due to accidents, illness, or serious medical conditions. This feature helps alleviate the financial burden caused by unexpected medical expenses.

Income protection for children:

Child Life Insurance Plans provide income protection for children earning at a young age, such as child actors, performers, and musicians. These plans protect their income and offer long-term capital appreciation benefits.

Collateral for education loan:

You can use Children's Insurance Plans in India as collateral for education loans , helping secure funds for higher education. As education costs continue to rise, relying solely on savings may not be sufficient. Child Insurance Plans offer an additional avenue to support financing for education, whether in India or abroad.

Financial support in the absence of parent(s):

In the unfortunate event of the death of one or both parents during the policy term, life insurance policy for the child provides a premium waiver rider. This rider ensures the continuation of the policy without needing the child to pay the remaining premiums. When purchasing the policy, the child is entitled to a lump sum payout.

Riders or additional benefits:

Child Insurance Plans also provide riders or extra benefits at additional costs. These riders extend the coverage and provide extra benefits in scenarios such as the death or permanent disability of a parent or the diagnosis of critical illnesses mentioned in the policy. Some common riders include income benefits, waiver of premium, accidental permanent total/permanent disability, critical illness, and accidental death benefits.

It is important to know that different insurance companies may offer variations of one of the enlisted plans with unique features and benefits. Consult your financial adviser to select one that best suits your child's requirements.

Child Insurance Endowment plan:

These plans combine insurance coverage and savings. You get a sum payout upon your child reaching a specific age or in the event of the policyholder's demise during the policy term. The maturity benefit can be used for your child's education, marriage, or other financial needs.

Child ULIP plan:

A unit linked insurance plan (ULIP) offers both Life Insurance coverage and investment opportunities. ULIPs invest a portion of the premium toward your Life Insurance while investing the remaining amount in market-linked funds. These plans allow you to choose from various investment options to help grow your funds over the long term.

Child Money Back plan:

These money-back plans provide periodic payouts during the policy term. These plans ensure liquidity at specific intervals, helping you meet financial milestones for your child's education or marriage. Your child receives the death benefit in the unfortunate event of your demise.

Child Term Insurance plan:

term insurance plans offer plain Life Insurance coverage for a specific term. These plans provide a lump sum payout to the child/guardian in case of the policyholder's demise during the policy term.

Child Health Insurance plan:

These plans focus on providing comprehensive health coverage for your child. They cover hospitalisation expenses and medical treatments, surgeries, and so on.

Child Education plan:

Education plans are structured to secure your child's educational expenses. The plans typically provide a lump sum amount at a certain age to fund the child's higher education. You can customise your child's education plan per your budget, the desired sum assured, policy term, and premium amounts.Also read: Why Every Millennial Must Invest in a Term Plan?

Death benefit:

The child receives a lump sum, or periodic payments, as a death benefit in case the parent passes away.

Survival or maturity benefit:

If the child survives the policy term, they receive a certain maturity benefit.

Premium waiver:

In some cases, future premiums are waived off under Child Insurance plans in case of the parent's unfortunate demise.

Education support:

Child insurance plans often offer the option to receive partial withdrawals or systematic withdrawals to meet the child's educational expenses.

Marriage/maturity benefits:

Some plans offer specific payouts at the time of the child's marriage or when they reach a certain age to help them fulfil important life goals.

Investment component:

Child Insurance plans may have an investment component, where a portion of the premium is invested in market-linked instruments to build a corpus over time.

Suicide:

If the parent commits suicide, the insurance company may not pay the death benefit to the child.

Accidents under the influence:

If the child meets with an accident while under the influence of drugs or alcohol, the insurance claim may get rejected.

Criminal acts:

The insurance policy may not provide benefits if the child engages in criminal activities and faces legal consequences.

Participation in illegal activities:

Any harm or loss resulting from the child's involvement in illegal activities may not be covered.

The minimum age to buy insurance for children can differ from company to company and across policies. Usually, you can consider Child Life Insurance plans for your child when they are as young as 30 days old. Some insurance providers may even offer plans for newborns. Although, some policy features and benefits may have age restrictions. You should check with different insurance companies or consult a financial advisor to determine the minimum age requirement for children's insurance plans in India based on your child's age and specific insurance needs.The two things you need to check are:

From birth:

The cost of Life Insurance for a newborn, so you can invest in a suitable product soon after your child is born to benefit from a longer investment horizon.

Long policy tenure:

Choose a Child Insurance plan with a long policy tenure (15 to 20 years or more) to allow for substantial growth and accumulation of funds.Also read: How To Choose The Best Child Education Plan?

It is important to keep valid documents of your child correctly filed. Remember to make copies of all the originals to serve as backups in case the originals are lost or misplaced. Here is a list of important documents for you to refer to:

• Birth certificate
• Aadhaar card
• Passport
• Vaccination records
• Insurance
• Medical certificates
• Guardianship nomination (if applicable)

Keep all the valid documents filed when initiating your claim process. It typically includes medical records, hospital bills, diagnostic reports, prescriptions, and other relevant documents the insurance company specifies. Ensure that you have all the required paperwork to support your claim. Also, take guidance from your financial advisor to help you navigate the claim process smoothly.

Notify your insurance company at the outset:

It is important to inform your insurance company about the claim you plan to file. Contact the customer service helpline to inform them about your child's medical treatment. Provide the necessary details, including the treatment required, the hospital details and the estimated date of hospital admission or start of treatment. Usually, after you notify your insurance company, they will activate a process or response code for your case. Remember to mention your case file or claim process code in every communication or follow-up email to your company. This way, it is faster to keep updates or fall back on earlier communication to track the progress of your claim.

Fill claim form:

Complete the claim form provided by the insurer. The claim form captures essential details about your child's health condition, treatment, and personal information. Fill in all the required fields and provide accurate information to expedite the claim process.

Submit claim form and documents:

The next step is to submit the filled claim form along with the supporting documents to your insurance company. You can also submit them online via email, through online portals, or directly at the nearest office.

Verifying your claim:

At this stage, your insurance company will review and verify your submitted claim form and documents. They may contact you for additional information or clarifications if required to facilitate the verification process.

Settling your claim:

The insurance company will process your claim after it is verified. They will determine how much you will be reimbursed, or they will settle the payment directly with your hospital based on your policy terms. They will notify you about the decision and email you details on the settlement amount.

Reimbursement or direct payment:

When your claim is approved, you receive reimbursement for the approved expenses incurred on your child's treatment directly into your bank account. Your insurance company may also settle the payment directly with the hospital on your behalf, as per your policy terms and conditions.

Remember to follow up:

Keep track of your claim status and follow up with your insurance company. Regular communication with your insurance company executive will help facilitate a smoother claim experience.

• Premium paid up to ₹ 1.5 lakhs is tax deductible under Section 80C.
• Avail tax-free maturity with an annual premium of less than ₹ 2.5 lakhs under Section 10(10D).
• Costs associated with a child's disability can qualify for tax deductions under section 80DD .
• Interest paid on higher education loans taken against the insurance policy is eligible for tax benefits under Section 80E.

• Start investing early if you want to leverage the power of compounding and build a substantial corpus over time.
• Premium payments for your Child Insurance plan may have tax benefits under Section 80C of the Income Tax Act.
• Child Insurance plans provide financial protection and security for your child's future needs. They combine life insurance coverage with savings or investment components. A suitable Child Insurance Plan will help you to fund your education, marriage, or other financial expenses.
• Customisation options are available to tailor the Child Insurance Plan to your requirements.
• Partial withdrawals or loans may be possible based on the child insurance policy type and terms and conditions.
• Surrendering the policy before maturity may result in the loss of certain benefits.
• Some types of Child Insurance Plans include Child Endowment Plan, Child ULIP Plan, Child Money Back Plan, Child Term Insurance Plan, Child Health Insurance Plan, and Child Education Plan.
• Some types of Child Insurance Plans include Child Endowment Plan, Child ULIP Plan, Child Money Back Plan, Child Term Insurance Plan, Child Health Insurance Plan, and Child Education Plan.
• Seek advice from a financial advisor to select the most suitable child insurance plan.