Child plan FAQs

1.What is a Child Plan?

It is a unique way to financially secure your child's future by investing your accumulated savings in a systematic manner. The plan assists you financially to fulfill all your responsibilities even in case of any contingencies.

2.What are the Features of a Child Plan?

Every child plan has a different set of features; however some basic features always remain the same. You can choose a plan by minutely looking at the characteristics of every plan and how each one is beneficial to you individually.

Allocation charges: These are the charges that your insurance provider deducts from the premium amount before investing it in the funds preferred by you. These charges fluctuate according to risk involved in the funds chosen by you.
Waiver of premium or payer's benefit: In case the payer is no more, the insurance company does not seize the coverage, instead waivers the premium and continues the policy to provide the maturity benefit to the child.
Riders: Premium waiver benefit is mostly available as inbuilt feature of any child plan. However, in many instances, it is not attached and you have to buy it separately. You should also look for the other riders like accidental death benefit, income benefit and critical illness benefit.

Loyalty addition: Any percentage of sum insured, as committed by the insurance company is paid to the beneficiary out of the company's profit is called as loyalty addition. It is payable at the death or the maturity along with the sum insured and the guaranteed additions.
Guaranteed addition: This amount is the fixed percentage of sum insured, which is payable for the number of years the premium is paid for, at the death or the maturity along with the sum insured.

3.Why Should I Buy a Child Plan?

You should buy a child plan to safeguard your investments against ever-rising inflation rate. Whether it is education, marriage or any other goal your child is pursuing, you will need to provide financial support to your child at every phase of his/her life. Keeping inflation in view, you will realize that amount you put aside as savings today would not be sufficient after a few years. Buy a child plan will ensure that your investments are at tandem with inflation, and you are able to fulfill your responsibility, come what may.

4.When Should I Buy the Child Plan and What Should be the Term?

You should buy the child plan and map the financial requirements as soon as your child is born, because the earlier you invest, the better are the returns. An early start will always keep you ahead of your child's requirements.

Always consider the age of the child to determine the term of your child plan. The policy term should be the number of years your child would ideally need to be self-dependant. For instance, the policy term for a ten year kid should be around 8-10 years. Lic child insurance plans are one of the examples of modern day insurance plans which provide you with all the required benefits and options to come in terms with initially only.

5.What are the Advantages of Buying a Child Plan?

A number of advantages are offered if you buy a child-plan. The major ones are:

Security: Your money is secured and a fixed return is committed on it as per the terms described in your policy. Long term goals that you foresee for your child are financed whether you are there or not.
Maturity benefits: Provided at the maturity are comparatively higher in the child plan than the other investment products. Guaranteed additions and loyalty additions paid with the sum insured are something highly preferred by the parents.
Personalized solutions: The plan can be chosen and altered to a certain level as per the specific need of the child and the parent. Riders available make it possible to personalize the plan for each individual.
Tax exemptions: You are eligible for tax benefits under section 80 C of the Income Tax Act 1961, on paying the premiums for the child plan.
Easy liquidity: You have the provision of liquidizing your plan through partial withdrawals.

6.What is a Traditional Child Plan?

Traditional child plan is basically a fixed return plan under which savings of the policyholder are invested in debt instruments where no risk is involved and stipulated bonus is added to the sum insured and paid at the death or the maturity.

7.What does Unit-Linked Child Plan refer to?

Unit-linked child plans are the investments made in debt as well as in equity instruments. A part of premium is invested in debt and returns are fixed on it. Other part of your premium is invested in equity, profit of which is subject to the market conditions. You have the provision of switching your funds from one type to another at any point of time during the term of the plan.

8.Which one Should I buy- a Traditional Plan or a ULIP?

Choose any plan as per your risk appetite, i.e. if you cannot bear loss and want to earn fixed profits even if they are low, you should go for traditional plan. In order you want high returns and are able to bear the risk which would depend on the condition of the market, you should buy a ULIP.

9.What does Guaranteed Addition mean?

Guaranteed addition is the amount that is the fixed percentage of sum insured and is payable for the number of years the premium is paid for, in addition to the death benefit or the maturity.

10.What is Loyalty Addition?

Loyalty addition is a percentage of sum insured, which the insurance company commits to pay out of the company's profit at the death or the maturity along with the sum insured and the guaranteed additions.

11.Are there any Tax Exemptions I Qualify if I Buy a Child Plan?

Yes, the premium amount paid by you for the child plan, qualify the tax exemptions under Section 80C of the Income Tax Act, 1961.

12.When is the Death Benefit Denied?

Death benefit can be denied in case:

The payer lapses the policy by not paying premium on time hence as per the terms and conditions of the policy, the insurance policy stands forfeited.
The payer commits suicide under the period of 12 months of acquiring the child plan or under the period of 2 months of reviving the lapsed child plan.

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