Child Insurance Plans

Child plan or child insurance plan are any Guaranteed Returns Plans (endowment or money-back plans) or Unit Linked Insurance Plans that help you save a corpus for your child. The savings aspect makes sure that you build a corpus over the long term and get good returns. You can pre-define the stages when you would need these returns, for instance, when your child gets into high school or college or when they get married. The life insurance aspect ensures that your child’s finances are taken care of by the life cover, in case of your unfortunate demise. 

Child-centric insurance plans are a financial tool which helps you plan a secure future for your child. It makes sure that financial insecurities do not come between your child and his dreams even when you’re not around. 

Child education plans are insurance-cum-investment plans (ULIPs) or guaranteed returns plans (money-back plans or endowment plans) that help to create a corpus for the child’s future, over a defined period. At the time of maturity, these plans pay out a lump sum to the child, which can be used to pay for education fees or marriage expenses.

Edelweiss Tokio Life Insurance does not offer a separate child insurance plan segment. We offer unique ULIPs and Guaranteed Returns Plans that offer specific features for securing the future of your child. 

A child plan can be an Endowment Policy, a ULIP, or a money-back plan. In a money-back plan, the child gets a lump sum survival benefit at regular intervals. These plans are helpful for people who need a lump sum amount at a time in the future. However, these plans do not offer significant returns. Hence, they might not be able to offset the impact of inflation, especially if you need the money for education expenses.

Secondly, a ULIP plan is an investment and insurance plan, where a part of your premiums is used to provide a secure life cover and the remaining portion of the premiums is invested in different market securities. The investment made is as per your life stage, risk appetite and financial objectives. In case of the demise of the parent, the child gets a lump sum amount. Moreover, all future premiums of the policy will be waived.

Thirdly, an endowment policy is a plan where you receive a lump sum along with bonuses. These plans are useful as they help create a corpus for higher education expenses, etc. However, these policies are different from ULIP plans as they offer a guaranteed return.

Child plans denote Savings plans or ULIP plans, whereas a term policy is a pure life insurance plan that guarantees a death benefit if the policyholder dies within the plan tenure. Post this, the plan ceases to exist. There is no maturity value offered by term plans in case the policyholder survives the term.

Alternatively, in insurance policies for children, the death benefit is paid upon the demise of the policyholder but the policy continues to exist. Moreover, the plan pays out a maturity benefit in case the policyholder survives the tenure.

Getting a degree from the best educational institute requires a strong financial plan. An IIM Ahmedabad course fee has risen by 4 times in the last decade crossing the Rs 20-25 lakh mark. The tuition fee for an undergraduate engineering student at IIT today (in 2020) is Rs 2-3 lakh per annum.  An MBBS degree from a private college which now costs about Rs 25-30 lakh. So, if you want your child to graduate from a premium institution then not only should be your child bright enough to qualify, but you need to be rich or save systematically to pay for the classes.

A child education plan is a combination of investment and insurance. It will help them focus on their career without worrying about finances even in your absence. The returns would be sufficient to help your child meet his future needs even when you are not around.

When it comes to your child’s education, it is a must to start saving as early as possible; to be financially prepared to support your Child’s dream. You could save up little by little every month, build up a fund over the long-term or you could start saving with a child insurance plan. You can choose to get returns at important stages of your Child’s life.

You can trust ETLI to be your partner in securing your child against financial uncertainties. Here are some reasons that make us a reliable partner:

Child insurance plans, i.e. ULIPs for children or savings plans for children, help you safeguard the future of your child. Given the rising education costs in the country, it is wiser to plan for your child’s education well in time. As per the “Household Social Consumption of Education in India” report, education expenses create a huge financial burden on households. This creates a situation where education beyond the secondary level nearly becomes unaffordable for most working-class people.

By investing in an insurance plan for your child, you secure your child against future uncertainties as well as build a corpus to fulfil expenses like sponsoring your kid’s education. In case of an unfortunate event leading to your demise during the tenure, the insurance plan will pay a lump sum death benefit to help your child cover the immediate needs as well as continue investing on the behalf of the insured. Moreover, the plan also waives all premiums in such cases.

Let us understand this through an example:

Getting a degree from the best educational institute requires a strong financial plan. An IIM Ahmedabad course fee has risen by 4 times in the last decade crossing the ₹20 lakhs mark. If it keeps on growing at the current rate of 20% per annum, it will easily cross ₹1 crore ten years later.

The tuition fee for an under-graduate engineering student at IIT today is ₹2 lakhs per annum. It is hundred times more than what it was thirty years ago, and is expected to touch ₹10 lakhs per annum figure in the next five years.

As per another 2018 report, an MBBS degree from a private college which now costs about ₹25-30 lakhs will go up to ₹50 lakhs over the next 10 years.

So, if you want your child to graduate from a premium institution then not only should be your child bright enough to qualify, but you need to be rich or save systematically to pay for the classes.

When it comes to your Child’s education, it is a must to start saving as early as possible; to be financially prepared to support your Child’s dream. You could save up little by little every month, build up a fund over the long-term or you could start saving with a ULIP or a Guaranteed Returns Plan for your child’s education planning. These plans not only give guaranteed returns on your savings but also offer you a life cover. You can choose to get returns at important stages of your Child’s life. And you can make sure that your child gets the benefits of the Child Insurance Plan even when you’re not around, with the life cover it offers.

So, yes. You do need a Child Education Plan.

A savings and insurance plan for your child is the foundation of their future. Here are three reasons why these plans are essential:

• Sponsor the education and development of your child: Education is a basic and critical need for your child. When it comes to education, you should not make any compromise. The better education you provide your child, the more equipped they become for prospects. But given the soaring cost of education in India, it is useful to invest in a child insurance plan. These plans allow you to create a fund that can be used to pay for your child’s education, higher studies, extra-curricular activities, and more.
 
• Creating a corpus for the future: As a parent, you would want to sponsor the marriage of your child, either fully or partly. On such a joyous occasion, you would not wish to compromise on the wedding functions and ensure everything is adequately done. You do not wish to be in a situation where you are unable to fund the marriage expenses. Moreover, you might want to gift a car or a bike to your child in the future or help them set up a business or leave behind a legacy for their future. With an insurance plan moulded for your child’s protection, you can cover these objectives more optimally. 
 
• Lead by example: As parents, you are the role model for your child. Your child learns from you and looks up to you to get a direction in life. The decisions you make as parents have a large influence on your kid. Hence, you must be financially disciplined and make prudent investments. A child insurance plan is one such investment that speaks of good judgement. When you set such examples for your children, you are helping them become smart individuals of tomorrow.
  

Selecting the right insurance plan for your child’ protection is a critical investment for the future of your child. You can use these steps to find the ideal plan for your child:

• Identify your needs and goals, and the amount you require. You can do this by ascertaining the money required to sponsor the education or marriage of your child.
 
• Based on your needs, choose the policy term and the premium amount that will help you determine the optimum sum assured.
 
• Browse through various insurance plans such as ULIPs, endowment plans, savings plans, etc. Understand their pros and cons, and select one that best suits your needs.
 
• Compare the different plans and companies available in the market, and ultimately select make an informed decision as per features, flexibility, returns, tenure, tax benefits, liquidity, reliability, etc.

The cost of education in India is highly burdening. Given the current rate of inflation, it is prudent for parents to choose a wise investment plan to provide for their child’s education needs in the future.

For instance, if your child desires to become an engineer in the future, you would want them to get the best possible education in the field. A good engineering institute presently costs around Rs 1 lakh. But in the coming 15 years, this would go up to ₹40 lakhs to ₹50 lakhs, assuming the average rate of inflation will be about 10% in the future.

And if your child wants to choose a private college, you can expect to shelve around ₹25 lakhs in the present. This would jump up to a crore in another 15 years.

These numbers depict an urgent need to make a smart investment for your child. With a strong corpus, you will be able to fund the education expenses of your child, which primarily include:

• Accommodation within the campus or outside, which is highly costly.
• Tuition fees of the institute, which is steeply rising since the past decade and is expected to shoot further up.
• Transportation – public and private, which can be extremely burdening.
• Food, which is highly expensive.
• Miscellaneous expenses like leisure activities, travelling, etc.

Moreover, these expenses differ and consistently grow as your child advances in age and further their aim. Primary education costs are lesser than secondary higher education. Boarding school expenses are much higher than normal schools. Moreover, the sharply rising inflation is another concerning factor.

The expenses of higher education in India

• Government college: ₹5 lakhs to ₹6 lakhs
• Private colleges: ₹8 lakhs to ₹10 lakhs
• International colleges: ₹1 crore

The expenses of medical education in India

• Government college: ₹5 lakhs to ₹10 lakhs
• Private colleges: ₹18 lakhs to ₹20 lakhs
• International colleges: ₹1 crore

The expenses of commerce, arts and humanities education in India

• Government college: ₹2,000 to ₹15,000
• Private colleges: ₹2.5 lakhs to ₹5 lakhs
• International colleges: ₹50 lakhs

The expenses of engineering education in India

Engineering in India is renowned worldwide, even in the developed nations like the U.S. A typical four-year engineering course will cost anywhere between ₹1.25 lakhs and ₹5 lakhs. But when it comes to top engineering colleges of the country like IIT, BITS Pilani, etc., the cost goes up to ₹10 lakh- ₹15 lakhs. When you speak of post-graduation in engineering, the expenses shoot further up. Very few colleges, including government ones, have a fee structure of less than ₹10 lakhs. In private colleges, the fee shoots further up to ₹50 lakhs. Besides, many other expenses will add-on and the food and lodging are separate too.

Given such dramatically strong figures, there is an urgent need for parents to choose a child plan that helps pay for such rising education expenses so that their child’s dreams do not suffer.

Myth 1 : Child Education Insurance Plans covers a child’s life. It is inauspicious to buy insurance in the name of a child.

Reality : Most child plans insure the life of the earning parent, and not the child. The benefit associated with child plan’s is that the child’s future dreams of pursuing higher education are fulfilled, in case of an untimely death of the parent.

Myth 2 : Child Plan ends if / when the parent dies.

Reality :  The beauty of child education plans is that usually they come with a Waiver of Premium Option, which means upon an untimely demise of the parent, the future payable premiums are waived off, and the policy continues. There is no impact on the benefits due to be received at maturity of the child plan.

Myth 3 :The child insurance plan is suitable only for meeting the education costs for the child.

Reality : Child Education plans are designed to take care of the rising cost of education for your child. However, there is no restriction on the usage of the amounts received at regular intervals during the policy term and at maturity. Example – If you invested in a child education plan for higher studies, however, your child chooses not to pursue further studies and use the funds instead for other commitments, he / she may do so irrespective of the original goal it was intended for.

Myth 4 : The Child Insurance Policy locks in the investment for a long period.

Reality :  Most online child insurance plans are flexible when it comes to policy term. The policy term of most market linked child plans usually range between 5 to 25 years. This means the earning parent can withdraw money, either partially or fully, if required earlier than planned.

To precisely know the amount, you should invest in a child plan, it is critical that you first understand the importance of good education and the corresponding cost. A good education from a renowned institute will help your child create a strong foundation for their future. With a good education, your child can earn better and also live a happy life, and more importantly become financially independent.

The average cost of education in India in 2020 is ₹15 lakhs. In 2040, it is expected to rise to ₹45 lakhs. Hence, your investment should be at least ₹10,000 per month for the next five years. This will help you ensure your child gets the best education possible.

Buying an insurance plan in India is very easy, you only need to submit the following documents:

• Proof of age such as Birth Certificate, Market Sheet, Passport, etc.


• Proof of identity such as Aadhar card, Passport, PAN Card, Voter ID, etc.


• Proof of income such as Financial Statements, ITR, etc.


• Proof of address such as Telephone Bill, Electricity Bill, Ration Card, Passport, Driver’s Licence, etc.


• Proposal form duly and truthfully filled.

When you buy an insurance plan that offers specific child-based features, make sure to check the claim settlement ratio of the provider. An insurance company with a high claim settlement ratio is more reliable as it increases the chances of claim settlement.

Here is a typical claim settlement process in the case of child insurance plans:

• In case of an event, notify the insurance company immediately or ASAP. You can do this via email or by calling the insurance company directly on the toll-free number. You can also choose to visit the nearby branch.


• After intimidating, you would need to duly fill the claim form where you would be required to list all details regarding the incident and more.


• You would need to give the required proofs, documents along with reports.


• Once you submit the form and necessary documents, the insurer will register the claim.


• The insurance company will appoint a surveyor to verify your claim and the documents.


• Upon approval, the insurance provider will settle the claim benefit within a stipulated time, which is generally 30 days from the document submission.

To register a claim, you will need the following documents:

• Duly filled claim form


• Policy documents


• Medical certificate


• Death certificate


• Medical reports and bills


• Port-mortem report, in case of an unnatural demise


• FIR copy


• Account details


• KYC of the nominee or the insured

An insurance plan that offers coverage to children is often compared with a PPF policy or a government-sponsored scheme such as Sukanya Samriddhi Yojna.

One of the most coveted benefits of an insurance plan for children is the waiver of the premium feature. As per this feature, if the parent of the child dies in the tenure of the child plan, the insurance company waives all the pending premiums of the policy. Further, the insurance company pays out a defined death benefit as a lump sum to the nominee, while the due premiums of the policy are paid for by the insurer on behalf of the nominee. At the maturity of the policy, the child receives the maturity amount as per the policy document.

If the policyholder dies due to the following circumstances, the insurance plan does not offer any benefit:

          1. Drug or alcohol use
          2. Self-harm or suicide
          3. Adventurous or risky sports
          4. Criminal activities