Choose the best Children’s Insurance Plan by Manish Misra

Your children are your pride and joy and you would like them to have the best that money can buy. As discussed in our earlier article, with a sound financial plan, you can make sure that materializing of your child’s dreams is not hindered for want of funds. Children’s insurance policies and products are designed with this specific aim in mind.

What are Children’s Insurance Plans?

These plans set out to secure you financially against the back drop of constraints such as inflation and the rising cost of education. They help you to fund various aspirations like an overseas education, extra curricular activities, sports training, supplementary vocational education, marriage celebrations, etc. by providing a lump sum amount at a specified future date.

An additional feature offered by children’s plans is that they continue to offer financial protection even in the event of the loss of the premium paying parent. This ensures that the amount envisaged is actually delivered even in the event of unforeseen eventualities.

In a nutshell these plans offer financial security to children in the form of savings combined with life insurance by paying at regular intervals so that the money is made available to your child at pre-determined stages.

Benefits of Children’s Insurance Plans :

• Children’s insurance plans enable the parents to save money for child’s future without any disturbance to the family budget. This is because the premiums can be chosen to suit the parent’s convenience.
• There are a number of options and customized products to choose from for the child’s future.
• Reversionary bonuses are usually declared by the insurance company annually and once declared are guaranteed.
• Tax benefits under Section 80C are applicable on the premium paid.
• Certain plan options also allow the plan to continue after demise of insured parent and the insurance company continues paying the premium.

Types of Children’s Insurance Plans

There are two broad category of Children’s Insurance Plans available today. They are :

1. Traditional Children’s Plans

Insurance companies offer policies such as children’s money back or endowment, which give a defined payout at a defined period.

Besides, if something unfortunate happens to you as a parent, not only does the child still get the sum assured on maturity, but the interim premiums are also waived off.

However, the return from such policies is relatively quite low, barely covering the inflation.
2. Unit Linked Children’s Plans

These Children’s insurance plan are very similar to any ULIP plan the only difference is that the beneficiary in such plans is the child. Not to mention, these plans come with a charges similar to any ULIP. Make sure you know about all the charges applicable before you buy these plans.

How to choose a Children’s Insurance Policy?

Premium

Most insurance companies offer children plans with various features at various prices. Most of these plans have riders like waiver of premium and accidental death benefit rider inbuilt in them and in cases of others you have to buy them.

But, there’s no free lunch. You have to pay for these riders.

When considering which one to buy, you should add the cost of the riders with the basic premium for the policy. Then you compare it to the premium of the policy where the riders are in-built; and then make your final decision.

Riders

Most child plans available in the market have many of the riders in-built. In others you have to buy them at an extra cost. In case of child insurance the riders are the most important parts of a policy as it will take care of the child and your child education and his/her career doesn’t have to suffer due to anything unfortunate happening to you.

• Comprehensive Health Benefit Rider Sum Assured
• Waiver of all the future premiums
• Income Benefit Rider
• Accidental Death Benefit Rider

Comparing Traditional Children’s Plans

Compare children’s insurance plans offered by all life insurance companies to help you decide the plan which suits you the best.

1. LIC – Jeevan Kishore

• Death benefit: Before commencement of risk: Premiums paid excluding the premiums for the premium Waiver Benefit. After commencement of risk: Sum Assured + vested bonuses upon the death of the life assured.  
• Maturity benefit: Sum assured plus accrued bonus plus final additions  
• Comment: Can be bought by any parent for their child less than 12 years for their bright future

2. ICICI Pru – Smart Kid Plan – Option 1

• Death benefit: Sum assured is paid and all future premiums are waived
• Maturity benefit: 30 per cent of sum assured plus Guaranteed addition plus Vested Bonus
• Comment: Guaranteed 3.5% of SA compounded annually for first 7 years of the policy.

3. SBI Life – Scholar II

• Death benefit: Sum assured plus all vested bonus is paid and all future premiums are waived
• Maturity benefit: 25 % of Sum Assured plus Vested Bonus
• Comment: Attractive rebate on premiums for Female lives and High Sum Assured

4. Tata Life – Assure Career Builder

• Death benefit: Payout as per maturity
• Maturity benefit: 40% of sum assured plus vested bonus
• Comment: Guaranteed addition of 10% of Sum Assured in case of more than 10 policy years

5. Bajaj Life – ChildGain 21

• Death benefit: 1) Below 7 years – Premiums paid will be refund without interest, 2) Above 7 and below 18 years – Sum assured with accrued bonuses 3) Above 18 years – Outstanding payouts paid as lumpsum.
• Maturity benefit: 35 per cent of sum assured
• Comment: In case of death or accident of insured during policy term, 1% of SA maximum to Rs. 10,000 paid per month till end of term of policy

6. Reliance Life – Child Plan

• Death benefit: Sum assured is paid and all future premiums are waived
• Maturity benefit: 25 per cent of sum assured plus accrued bonus
• Comment: Attractive rebate on premiums for High Sum Assured

7. Max New York – Children Endowment to 24 (Single)

• Death benefit: Refund of Premiums plus Interests plus Accrue bonus (if any)
• Maturity benefit: Sum Assured plus accrued bonuses
• Comment: Gives your child a lumpsum amount at age of 18 to support his higher education/ marriage

8. ING Life – Creating Life Child Protection Plan

• Death benefit: Sum Assured and vested bonuses.
• Maturity benefit: Sum Assured plus accrued bonuses
• Comment: Gives your child a lumpsum at maturity to support his higher education/marriage

9. Shriram Life – Vivah

• Death benefit: Sum Assured and vested bonuses
• Maturity benefit: Sum Assured plus accrued bonuses
• Comment: In case of death or accident of insured during policy term, 1% of SA paid per month till end of term of policy

Comparing few Unit Linked Children’s Plans

Unit linked Children’s Insurance plan comes with various charges applicable to any ULIP. Before you decide to buy one for securing the future of your child, make sure you understand these charges and get a clear picture of how much it will cost you on your chosen plan. Here is a list of charges applicable on Unit linked Children’s Insurance plans:

• Premium allocation charge
• Fund management charge
• Surrender charges
• Mortality charges
• Fund switching charges

There are some other charges too, such as:

• Partial withdrawal charges
• Policy administration charges
• Revival charges
• Miscellaneous charges

Conclusion

All parents dream that their child gets the best possible childhood and a safe and secure future. Yet sometimes due to sheer negligence or laziness, parents are unable to offer their children a well laid out financial platform to pursue career ambitions. Plan ahead and secure your child’s future through Children’s Insurance Plan today!

Source : http://www.personalmoney.in