What is Child Education Plan?
Child education plans are investment cum insurance plans that help to plan children’s future financial requirements by creating funds over a period of time. A child plan ensures payment of a lump-sum amount to a child on maturity to cover the child’s college fees or marriage expenses.
Compare Best Child Insurance Plans in India
A wise man once said, “Your child will keep building castles in the air; you better start buying bricks for those castles today.” Loving your child is what comes naturally, but as a responsible parent, you have certain obligations towards your child.
Getting a child insurance plan is one such obligation; in fact, the most important one. If you are reading this, you’ve already proved that you are a concerned parent finding ways to secure your child’s future.
- Child Savings Planvs
- Sukanya Samriddhi Yojana Schemevs
- Public Provident Fund
- Invested Amount can be Withdrawn after
- 5 years
- 21 years
- 15 years
- Conditions for Premature closure
- Anytime after 5years
- Extreme Compassionate Grounds
- Serious Ailments or for education
- Penalty on Premature Closure
- No Penalty after 5 years
- Returns reduced to Post Office Savings rate
- 1% reduction in interest rate
- Max deposit amount in an year
- No Limit
- 1.5 Lacs
- 1.5 Lacs
- Documentation Required for Withdrawal
Benefits of Child Education Plan
A child insurance plan offers a wide range of exciting and unique benefits to the policyholder. It offers a comprehensive maturity benefit along with life cover to financially secure the future of the child. With amazing advantages, a child insurance plan is a must-have in your kitty.
A child insurance plan will help a policyholder make sizeable savings for his/her child without having to run from pillar to post.
Let’s take a look at the benefits offered by the child insurance plan.
- Corpus for Child’s EducationIn today’s times, having a corpus for the bright and fruitful future of your choice is important and should not be overlooked. A child plan helps you to build a corpus for your child and save enough for the coming times. With the regular premium payments, the lump sum amount can be accumulated. This amount can help the child in the future and enable him/her to meet the educational expenses without any stress or financial burden.A child’s insurance plan is enough to pay for college education and even higher education in a foreign country. The money available from a child insurance plan depends on its terms and conditions and on the amount you have invested in it as premiums.
- A Kitty for Medical Treatment of the ChildChild plans also allow the option of withdrawing money during the tenure of the policy. This can be used for the medical treatment of the child when he or she falls ill. Such partial withdrawals come in handy when the child is hospitalized due to an ailment, a minor accident, or a serious medical condition. The best child plan helps to reduce the financial burden caused by medical expenditure and such payouts act as an add-on for one’s health insurance plan.
- Supports the Child in the Absence of Parent(s)Death does not come with an invitation and no amount of preparation can leave one ready for such an event. The consequences are more so for the innocent child. The death of the parent(s) causes severe trauma to a child and can leave his or her future hanging by a thread. The insurance company offers a premium waiver if the parent (i.e., the insured) passes away during the policy term of a child insurance plan.The premium waiver benefit often comes inbuilt with the best child insurance plan. If not, one should opt for this rider. The child receives a lump sum amount promised at the time of purchasing the best child plan and does not have to pay a balanced premium.This rider enables the policy to continue without any breaks and passes the financial burden of the remaining premium to the insurer.
- Income Protection for the ChildSome child savings plans provide regular income to children, which is equal to 1% of the sum assured if parents are not around to pay the premiums.
- Acts as Collateral for Loans for Higher EducationHigher education is expensive, whether one plans to send the child to a private college or university in India or abroad. International education is significantly more expensive. A child plan comes in handy if one intends to secure a loan for higher education as these are allowed to be used as collateral. They can also be used as collateral for other child-related borrowings.
- Partial Withdrawal to Enhance your Child’s TalentIf your child posses a special talent like playing an instrument or acting, then you can encourage your child to pursue it further by making a partial withdrawal from the child insurance plan. Moreover, some of the plans offer the option of periodic pay-outs that can be used to fulfill the expenses that occurred while pursuing the child’s talent further.
- Options to Choose RidersSome of the child insurance plans offer the inbuilt rider benefit of waiver of premium. Under this option, the entire premium of the policy to be paid during the policy tenure is waived off in case of the demise of the insured person. Similarly, some of the child insurance plans also offer the option of personal accident rider.
Key Features of Child Insurance Plans:
A child insurance plan comes loaded with an array of useful features to ensure a rewarding return and protection. Quite expectedly, a child insurance policy is a must for every parent.
Child plans are available in both non-linked and linked types.
Here’s a little overview of just some of the many helpful and useful features of the best Child Insurance Plan:
- Waiver of Premium BenefitWaiver of Premium (WoP) is an inherent feature of a child’s education plan. This feature is applicable if the parent dies in a stipulated period. In such a case, the sum assured will be paid out to the nominated beneficiary, while the due premium for the remaining policy term is paid by the insurance company.At the maturity of the policy, the child is entitled to receive the maturity amount as mentioned in the policy document. In case this feature is not a part of the plan, it is recommended to include it without failure.
- Partial WithdrawalIt is often seen that parents instead of holding back themselves for the policy to mature, like to withdraw the fund value in multiple fragments whenever they need it. This is often selected to fulfill the financial needs of the child at certain key moments. Many child plans come with an option of partial liquidity after the child turns 18.
- Sum AssuredThe sum assured in a child’s education plan is the amount of money that is paid out in the event of the unfortunate or untimely demise of the parent. Most of the time, the sum assured is more than 10 times the current gross earning of the policyholder.
- Tax BenefitsAll child plans fall under the highest bracket of tax exemption i.e. E-E-E category. This is the highest grade of tax benefit accorded by the Indian Tax Laws to schemes like PPF.
- Immediate Financial ProtectionIn the case of the death of a parent (policyholder), the child plans to pay a lump sum amount. This money is completely tax-free and is usually sufficient to pay off any immediate debts so that child education is not impacted.
- Maturity AmountYou should choose the maturity amount keeping an eye on your child’s future. You can consult a financial advisor and remember the inflation rate along with interest rates and all other factors, and plan the maturity amount that you would need at policy maturity. You can receive the maturity amount as a lump-sum pay-out or over 5 years.Also, child insurance plans such as single premium plans may not offer appropriate maturity features and benefits, so go through the fine prints of the policy document before opting for it.
- Policy TermWhen you realize that your child should get on his/her feet is the best time for the policy to mature. Choose the policy term to meet the exact period. For example, if one of your children’s age is 10 years, then choose the policy term of 8 years.
- Premium AmountIt is subject to the sum assured and the amount of maturity benefit you opt for. You may opt to pay the premium amount frequently at regular intervals or for a certain period. Most life insurance providers offer options such as annual, semi-annually, quarterly, and monthly modes of payment. The amount of premium varies depending on the sum assured you choose in the case of the traditional child plans.
- Funds’ ChoiceA child education plan such as a ULIP plan enables you to choose the type of fund to invest in (money market, hybrid, debt, and equity). You are given an option of Dynamic Fund Allocation and Systematic Transfer Plan also.
- Add-On Covers/ Rider BenefitsRiders or add-ons are additional covers that you can add to your child’s plan to enhance its coverage. Many add-ons are offered by various insurance providers. These riders or add-ons are divided broadly into three sub-categories:
- Accidental Death and Disability Benefit – The Accidental Death and Disability Rider Benefit pays the extra sum assured in the event of your unfortunate mishap causing death or disability.
- Premium Waiver Benefit – This rider may be already added to the best child education plan, so check your policy document in this regard.
- Critical Illness Rider Benefit – Critical Illness rider benefit offers coverage for a pre-determined set of critical diseases.
- Loan BenefitYou can also avail of secured loans against a child education plan.*All savings are provided by the insurer as per the IRDAI approved insurance plan. Standard T&C Apply
*All savings are provided by the insurer as per the IRDAI approved insurance plan. Standard T&C Apply
Types of Child Plans
Mostly all the insurance providers offer child insurance policies as a vital insurance product in the portfolio. These child plans may vary on different parameters basis the individual priorities and needs and come in handy with customized and tailor-made features.
Different types of Child Plans in India are:
- Single-Premium Child PlanThe policyholder pays a lump sum amount in the form of a single premium for the entire policy term and stays worry-free from remembering the due dates of premium payment. One does not have to come across any hassles of arranging finances for the premium payment. Some insurance providers additionally offer appealing discounts or reduce the premium on Single-Premium child plans.
- Regular Premium Child PlanUnlike a single premium child insurance plan, a regular premium child policy offers you flexibility on payment of premium. You can pay the premium monthly, quarterly, half-yearly, or yearly.
- Child ULIPChild ULIP plan gives you three-prolonged benefits, along with higher insurance coverage, contribution in the equity market, and disciplined investments. Three benefits mean that the nominated beneficiary, i.e. the child receives the sum assured on the demise of the insured parent or guardian. The future premiums are waived off and the maturity amount is paid when the policy matures, making sure that the future dream of your children is fulfilled.
- Traditional Child Endowment PlanWhen it comes to the child endowment plans it is essentially a traditional life insurance plan that provides security and savings. It enables you to save over some time and on policy maturity receive the lump sum amount. A child endowment plan will act as a financial help wherein the financial objectives for the benefit of your child will be fulfilled. The premium is invested in debt instruments while the decision is kept with the insurance company. The bonus payable at maturity decides the returns.
How is it Different from a Term Plan?
|Scenario||Term Plan||Child Plan|
|In case the Life assured dies||The death benefit is paid and the policy comes to an end.||The death benefit is paid and the policy continues as the insurer pays the rest of the premiums.|
|In case the Policyholder survives||No Maturity Benefit||Maturity Benefit|
How Does the Waiver of Premium Benefit Work?
In case you are not aware then a waiver of premium (WoP) is one intrinsic characteristic of a child insurance plan. However, if your child’s plan does not include it, you should look forward to including a waiver of premium to the child plan and you need not pay anything additional.
During the tenure of the policy, if the parent passes away then under such a circumstance, waiver of premium is likely to be applicable. Moreover, under such a condition, the prospective premium is paid by the insurance provider and the child will receive the maturity amount as discussed during the inception of the policy.
Do you need a Child Insurance Plan?
Yes, you do!
Here’s why – at the present rate of inflation, the ever-soaring costs of education worry us all.
Did you know 65% of the parents spend more than half of their annual income on the education of their child and extra-curricular activities?
According to a survey on “Parents wary of rising education cost of their children” of young parents for the education of their child revealed that the average spending on a Single child at primary or secondary education on the expenses excluding the tuition fees has risen from Rs.65,000 in 2011 to Rs.1 Lakh (approximately) in 2019.
Child Insurance Plan critics debate that these plans come at a higher cost as compared to a term insurance plan. They say that rather than allocating a large amount of money as a premium to child insurance, a parent must buy term insurance with the same sum assured for him/her and invest the remaining amount in mutual funds. After the policy matures, he/she will have a huge and bigger financial corpus.
However, they miss out on a very important and crucial detail.
What happens when a parent faces an unfortunate and untimely death five years after buying the plan?
The term insurance plan will give a lump-sum amount of money for the immediate requirements and needs of the policyholder’s family and the mutual fund investment will also stop. However, the best child insurance plan will not only pay a lump sum amount but also continue investing on behalf of the insured.
Insurance companies believe that the premium waiver benefit in a child insurance plan is the key as it does not let the demise of the insured derail the investment plan for the child.
How Much Should You Invest In a Child Plan?
To answer this question, it is important to understand the importance of good education in India. India is rapidly moving towards a society where the gap between rich and poor is widening. A good education can be a foot in the door for your child to start earning a good livelihood and more importantly not become a liability on your earnings when you need your earnings for your retirement.
|Cost of Education(Graduation course) in India in 2020||Cost of Education in India in 2040||Investment Amount|
|15 Lakh||45 Lakh||10000 per month for the next 5 years|
How does it Work?
A child insurance plan can work as an Endowment Policy, a ULIP, or money-back. The money-back plan is so far the most sought-after. This scheme makes sure that your child will get survival benefits at regular intervals of time. These plans are highly useful for individuals who need lump sum money at regular intervals and help in life stage planning. The disadvantage of using the money-back only is that sometimes the returns from this investment may not match the rate of inflation, especially when you plan to it for the education of your child. Cost of education is rising at around 12 percent in comparison to this, money-back plans would give you approx. 4-8 percent, leaving you underfunded at the time of the goal.
Moreover, money-back plans have steep premiums. Then again, ULIP plans are non-traditional plans and the returns depend on the market condition. In case of the demise of the parent, the sum assured would be received by the child as a lump sum. This will include the waiver of all the future premiums and the fund value upon its maturity.
Do not forget that ULIP plans to deliver a wide variety of funds ranging from aggressive to conservative. ULIP schemes give you an option of switching funds from equity to debt and vice versa without paying tax on it.
The third operational child plan instrument could be the Endowment Policy. This policy is where you will receive the lump sum amount on maturity along with bonuses. This is beneficial as it gives space for preparation of your child’s expenses like higher education, etc. However, this is different from ULIPs, since it allows for a least guaranteed payment.
Let us Take examples and understand the working of all kinds of child insurance plan:
Imagine, Mr. Sharma has a child of 5 years and he would need money when his child would turn 20 for higher education. He, thus, purchases a child policy for 15 years.
- Scenario 1:Mr. Sharma needs a financial corpus of Rs 10 Lakh. So, he purchases a traditional endowment plan with a Sum Assured of Rs 10 Lakh for 15 years and pays a premium every year. If during the policy term (i.e. 15 years), Mr. Sharma dies in the 8th year, the policy would not end. The insurance provider would pay a death benefit (generally the SA of Rs 10 Lakh) immediately and waive off the future premiums. This policy would then continue for the remaining 7 years. After completing 15 years of the policy term, the policy would mature and pay a maturity benefit of Rs 10 Lakh. Hence, the child policy pays the financial corpus, which Mr. Sharma would require after the completion of 15 years for the higher education of his child. M. Sharma’s dream gets fulfilled even when he’s not around.
- Scenario 2:Mr. Sharma buys a money-back policy that promises to pay around 20 percent of the Sum Assured after the completion of every 5 years. After completing the first 5 years of this child insurance plan, Mr. Sharma gets Rs.2 Lakh (where SA is Rs.10 Lakh). Henceforth, in the 10th year also, he receives another Rs.2 Lakh. In the 12th year, Mr. Sharma faces an unfortunate death. This policy will pay the total SA of Rs.10 Lakh regardless of the money-back benefits already paid. The insurer waives off the premiums for the next 3 years and the plan continues. Upon the maturity of the best child policy chosen by him, the guaranteed maturity benefit, i.e. 60 percent of the SA is again paid.
- Scenario 3:Mr. Sharma purchases a ULIP plan and pays a premium of Rs.1 Lakh every year for 15 years. In case of his demise during the policy term of the child plan, the insurance company will give the death benefit. Moreover, the insurer will waive off the premiums and the child education plan would continue. On maturity of the plan, the insurer will pay the fund value that would aid Mr. Sharma’s family to send his child abroad for higher education.
Documents Required for Child Policy
Here’s a list of documents that will be required while buying a child policy:
- Proof of AgeBirth Certificate, 10th /12th Mark sheet, and Passport.
- Proof of IdentityAadhaar card, Passport, PAN Card, Voter ID
- Proof of IncomeIncome proof showing the income of the buyer of the insurance.
- Proof of AddressTelephone bill, Electricity bill, Ration card, Passport, or Driving License can be used as address proof.
- Proposal FormDuly filled proposal form.
Child Insurance Plan Claim Process
You should buy a child insurance plan for your child from an insurance provider that has a higher claim settlement ratio. This will make sure of the quick and smooth claim process and settlement in times of crisis. Here’s the common claim process for almost every insurance provider:
- In case of any situation for, which you need to file a claim, notify the insurance provider about the incidence ASAP. You can do this online by sending an email or by calling on your insurer’s toll-free number or simply by paying a visit to its nearest branch office.
- Submission of the duly filled claim form is also necessary along with giving all the minute and necessary details such as the cause and the date of the incident, nominee’s name, etc.
- Once you register a claim with the insurer, provide the necessary and supporting documents along with reports.
- The insurance provider will appoint a surveyor to verify the case and the supporting documents.
- If approved, and with no further inquiry, the insurance company transfers the claim benefit with 30 days of the furnishing documents.
Documents Required for Child Insurance Claim Process
You would require the following documents while filing a claim for a child plan:
- Duly filled claim form
- Policy document
- Medical certificate
- Death certificate
- Diagnostic reports, prescriptions
- Post-mortem report (in case of unnatural demise)
- FIR copy (in case of unnatural demise)
- NEFT details
- KYC of the nominee and the policyholder
Exclusions of Child Insurance Plan
The insurance provider does not offer coverage in the event of demise occurred under certain circumstances. They are known as exclusions. Child insurance plans do not include the following cases:
- Drug or alcohol abuseIn case the policyholder dies due to drug overdose or alcohol abuse, the nominee does not receive any benefit.
- Self-harm or SuicideThe nominated beneficiary does not receive any claim amount in case of death due to suicide within one year of buying the child policy.
- Adventurous or Risky SportsIn case the insured happens to take part in any adventurous or risky sports like skydiving, rock-climbing, racing, etc. that lead to death, the insurance provider does not entertain claims.
- Criminal ActivitiesAny criminal or illegal act or act of war leading to the demise is also not covered under a child plan.
Understanding the Cost Structure of Education in India
Assuming that the rate of inflation is the equivalent 10% going ahead.
Now having said so, in today’s time somebody who desires to pursue engineering in any of the premier colleges in the country would cost about Rs 10, 00, 00. And, then in the coming years say 15 years it would be somewhere between 40 to 50 Lakh.
Likewise, if a private medical college charges Rs 25, 00, 00 then you can easily calculate that in the next fifteen years you need to have a corpus of about a crore.
India is one of the most opulent developing countries across the globe. Gone are the days when India was only limited to be known for its rich culture and traditions. Today, it has also earned a name when it comes to the educational sector.
Today, in India, we have a plethora of options available in terms of schools, colleges, and universities, and opting for the ones that suit your requirements. However, it is prudent to understand the factors which affect the cost of education in India.
Primary Education: Generally, if a student is studying in a government school somewhere aged between 6 to 14 years the cost of education is almost negligible, sometimes almost free. On the contrary, when it comes to private schooling the school mostly charges let’s just say towards a lower end Rs.1200 to Rs.2, 000 every month.
Secondary Higher Education: Secondary higher education essentially covers children who are aged between 12 to 18 years. So, if a student is in a government school for 6 years at a stretch it would cost him approximately Rs.30,600 and in private schools, the parents would end up paying approximately Rs.3, 96,000.
In case, if the child is put up in a boarding school, the parents would end up paying Rs.18, 00, 000 for the coming 6 years. As per a survey, 169% has been the ascent in inflation in regards to both primary and secondary education from 2005 to 2011.
The Expense of Graduation and Post-Graduation Education in India
- Government College/ University: Rs.5, 00,000 to Rs.6, 00,000
- Private College/ University: Rs.8, 00,000 to Rs.10, 00,000
- International College/ University: Rs.1, 00, 00,000
The Expense of Medical Studies in India
- Government College/ University: Rs.5, 00,000 to Rs.10, 00,000
- Private College/ University: Rs.18, 00,000 to Rs.20, 00,000
- International College/ University: Rs.1, 00, 00,000
The Expense of Commerce and Arts/Humanities in India
- Government College/ University: Rs.2,000 to Rs.15,000
- Private College/ University: Rs.2, 50, 000 to Rs.5, 00, 000
- International College/ University: Rs.50, 00,000
The Expense of Engineering in India
The course of engineering is considered to be one of the most sought career options undertaken by a majority of students in India. Besides, it is also one of the reputed and well-paid jobs.
For a four-year engineering course, a student ends up paying Rs.1, 25,000 to Rs.5, 00,000. When it comes to India’s finest engineering colleges such as IIT, NIT, BIT’s Pilani, etc. the parents need to pay approximately Rs.10,00,000- to Rs.15,00,000 respectively.
Just like the expense of engineering, you may consider the expense similarly.
One of the most cherished dreams for any medical aspirant is becoming a doctor. Becoming a doctor is something, which takes a lot of hard work and sincerity and something to take extreme pride in. In India, the medical seats are limited and the competition is high.
In terms of fees structure and other expenses, the government colleges/ university have a reasonable structure with fewer than Rs.10, 00,000. However, in private colleges/ universities, the fees could easily go up to Rs.50, 00,000 for the equivalent.
And, if someone is interested in undertaking a postgraduate degree in the same field, then one should be mentally and financially stable to spend approximately Rs.30, 00,000 in a private institute.
As discussed earlier, raising a child is no meek man task and to raise a child in the best possible manner financial planning is of utmost importance. In case, as a parent you still wonder in regards to the importance of planning then we will help you.
The below table consists of the basic and essential educational expenses that are involved when it comes to raising one or two children:
|Expense||Yearly Expense For Single Child||Yearly Expense For Two Children|
|Basic Expenses Involved In School|
|School Uniform||Rs 3,000||Rs 6,000|
|Transport, Lunch, and Tuitions||Rs 36, 000||Rs 75, 000|
|School Shoes||Rs 3500||Rs 7,000|
|Sports Kit||Rs 3500||Rs 7,000|
|Bottles and Bag||Rs 1800||Rs 3500|
|Coursebooks||Rs 4500||Rs 8500|
|Computers||Rs 2500||Rs 3800|
|School Club||Rs 2500||Rs 4000|
|Stationary/ Newspapers||Rs 3000||Rs 5600|
|School Trips||Rs 3800||Rs 7000|
|Fair||Rs 3500||Rs 5500|
|Building Fund||Rs 15, 000 to Rs 25,000||Rs 30,000|
|Primary Level||Rs 2,000||Rs 4,000|
|Secondary Level||Rs 4,000||Rs 8,000|
|Coaching/ Tuition Expenses|
|Primary Level||Rs 3,000||Rs 6,000|
|Secondary Level||Rs 8,000||Rs 10,000|
How to Get the Best Child Education Plan?
There are many child plans offered by insurance providers; however, certain things should be considered while choosing the best child plan to ensure the best future for your child. The below-mentioned tips help in making a wise decision to best meet the child’s needs.
- Start EarlyIt is advised that you start investing as early as possible for the future of your child as it helps to build a larger corpus, which in turn, gives greater freedom in taking any financial decision.Most child plans offer maturity benefits and start giving pay-outs at key milestones in life after the child turns 18 years old. The overall benefit of the best child insurance plan is higher if one starts investing early.Starting early helps as the investment returns between starting a couple of years later for the same plan and the same amount can mean a difference of a few Lakh.
- Factor in Economic VariablesIt is important to understand that savings and investments for your child will be taken advantage of only in the forthcoming years. Multiple economic variables need to be factored in while deciding an appropriate sum assured.Inflation, an increase in the cost of education, and healthcare expenses, among other economic factors, if accounted for properly will provide adequate funds for the child in the future. The best child education plan can help you fight this.
- Special Attention to Terms and ConditionsYou should scrutinize the fine print and understand the terms and conditions of the child insurance plans’ policy document properly. The best child plan has unique features and it is important to interpret them correctly. This will prevent confusion at the time of maturity and/or in the pay-out.It will also help in selecting the best education plan as per individual requirements, one that is best for the child’s needs.
- Choose the Premium Waiver BenefitIn the event of the policyholder’s unfortunate death during the policy tenure, insurance companies often offer to waive the premium. This is known as premium waiver benefit or self-funding of premium. It helps in continuing the policy without straining the family including the child for premium payments.The child receives the full benefit at maturity, promised at the beginning while purchasing the policy. This feature is normally built into child plans; if not, then one should go for this rider.
- Opt for Partial Withdrawals ClauseEmergencies can happen at any time and the child may require financial aid to tide over emergency cash requirement situations. The provision of partial withdrawals allows withdrawal of partial sums of money from the best child education plan to meet unforeseen expenses.This prevents any emergencies from causing any sort of financial instability in the family or the child’s education or dreams. Partial withdrawals help in not disturbing financial planning and not resorting to regular income to pay off the requirements.
- Choice of FundsChild plans usually invest funds collected from policyholders in capital markets to earn a higher return. However, they offer the insured or policyholder, the choice to choose the type of fund to invest their money in depending on individual investment appetite and risk-taking ability.Those who are risk-averse may want their funds to be allocated in debt, which offers more stability against market volatility. People who want to earn a higher return on investment may be fine with their investment being put into equity.Investment Options like Systematic Transfer Plan and Dynamic Fund Allocation help in safeguarding investments against market instability. These child plans allow for higher return investments in the initial years by putting the money in equity-oriented firms and for stable growth in the later years by switching to the more secure debt funds.Most insurance companies ensure that the allocation is automatic and the parents do not have to worry about safeguarding the important capital to meet the upcoming future expenses of their loved one.
- A Word of CautionIt is important to choose a trusted appointee for the best child plan selected by you. Your appointee must be someone you share a strong relationship with and someone you can count on, as your child must be taken care of when you are absent. In case of an unfortunate event, the claim amount is received by the appointee till the child gets matured and capable of handling the lump-sum payout of the sum assured. In case the appointee fails to take care of the child and turns out to be excessively careless, there are chances that the amount of money is being exhausted before the child reaches the age when he/she needs it the most. So, it is best to be double sure before you choose an appointee for the policy.
- IllustrationYou bought the best Child Plan for your 6-year-old child with 10 years of the policy term and expecting to receive the maturity benefit of Rs.20, 00,000. You opted for a life cover of Rs.25, 00,000. Unfortunately, you died 4 years after the policy began. The insurer is liable to pay the appointee a sum of Rs.25, 00,000 and also to bear the premium to be paid for the rest of the policy term left, i.e. 6 years. The child will also get the maturity benefit of Rs.20, 00,000 once he reaches the age of 16 years.