What is Child Insurance Plan? What are the Types of Child Plan

As a parent, you would always want the best for your child. You provide your kid with all the happiness and try to accomplish every dream, but what about securing your kid's future? With the surging cost of education and the rising expenses, you must avail of a child insurance plan. As a concerned parent, you should invest in a policy to meet your child's financial needs.The child insurance plan offers the dual benefit of investment and insurance in a single policy. The policy aims to create a corpus that will help secure your kid's future. Once the policy matures, the lump sum amount can be utilized for educational expenses, marriage, or other purposes.

A child plan functions just like a life insurance policy . It is an agreement wherein the insurer protects the future and helps to build an adequate corpus for your child in exchange for a premium that you pay as a parent. In this policy, the parent is the policyholder, and the child is the beneficiary.Under the policy, the insurer provides lumpsum money only in case of two events.

1. When there is a death of the policyholder i.e., the parent and
2. When the policy matures.

One of the best highlights of the policy is the death benefit. In the event of the policyholder's sudden death, the child gets the lump sum amount that will help your child achieve the major milestones of life. Post the death of the policyholder; most insurers offer a waiver on future premiums. Insurers pay the future premium on behalf of the child. The sum assured is then handed to the child upon the maturity of the policy.In terms of investment, a child insurance plan helps accumulate enough money for your kid's future, which can be used for various milestones like marriage, setting up a business, higher studies, etc.

There are two major types of Child Insurance Plans; these include Unit Linked Insurance Plans and Endowment Plans . Unit-Linked Insurance Plans: Under this plan, you get to invest in debt and equity financial instruments. The equity exposure is a bit higher, which guarantees you better returns to secure your child's future. As compared to endowment plans, ULIPs are risky as the investments are focused on market-linked funds. Endowment Plans: This is a type of life insurance plan that offers security and investment benefit. The premium you pay for the policy invests in low-risk products where the returns may not be high but stable. This is a participating plan that offers guaranteed payout in the event of the policyholder's death or when the policy matures.Choosing a plan solely depends on your lifestyle needs and budget. But you should start early so as the premium rates are low and you can accumulate enough savings for your child's future.

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.