A primer on child insurance plans in India

Child education plan

Parents consider their children as the most precious parts of their lives. They would go to lengths to ensure that they should live a fulfilling, comfortable life and enjoy a respect in the society. That is why many parents are now seriously planning for the future life of their children even before they reach teenage. Investing in a good child plan is one of the best ways to secure the future of your child as these plans are specifically designed to meet their diverse needs during different milestones years. In order to select the best plan, you need to have a good, in-depth knowledge of a child plans. Here’s a primer that can help you when you plan to invest in a good plan:

An Introduction

A Child Plan is a purpose specific insurance plan specifically designed to cover the financial needs of your child as they grow up and would require monetary assistance during different milestones of their lives like higher education, marriage, starting a new business etc. There is a provision for multiple payouts ensuring the steady flow of funds instead of a single time lump sum amount.


The main objective of these plans is to build a comfortable corpus over a long period of times that your child should have an easy access to sufficient money when s/he will need it during the milestone years. Depending upon their specific types, these plans invest money in different investment products like government securities equities debt, etc. so that it can keep on growing with the time. A lump sum amount is paid on the maturity. Demise cover is also paid by such plans.

Benefits of investing in a child plan

The major difference that offers child investment plan a cutting edge above other plan is that in the event of parent’s demise the child will get a lump sum amount but the plan will not be stopped. It will not only continue until maturity but also the child will not be liable to pay any further premiums as all the premiums will be borne by the insurance company.  Waiver of the Premium is actually the distinguished feature of this plan that offers it a unique character.

When will child realize the benefits?

Going by the above statements the child is entitled to get lump sum amount on 2 occasions- at the time of demise their parents and at the maturity date of the plan. In order to make the plan all the more beneficial, many companies also allow multiple payout options to take care of different milestone of a Child life.

Major Types of Child Plans

Two major types of child plans in India are endowment plans and ULIPs or Unit-linked Insurance Plans.

  • Endowment Plans: Under endowment plans the insurance companies generally pass on a small percentage of their profits to your child plan and add it in the form of Bonus. For example, your insurance company has invested in some debt funds and made some profits. In that case, a small part of those profits will e added to the plan in the form of the bonus.
  • Child ULIPs: Child ULIPs have a dynamic approach and utilize a strategy that is focused on benefiting from changing markets by rotating their funds wisely and periodically in equity products. Understandably, with the rewards, these plans also carry some risk. High entry charges of these plans mean that you have to pay higher amount while investing during the starting years but the amount decreases during subsequent years.

In both the plans the life cover and payment of lump sum amount in the case of parents’ demise and h policies are continued without requirement further premiums. The family also receives an amount equivalent to the life cover + Bonus (in the case of endowment plans) or Marked linked value (for ULIP Plans)

How to invest in a child plan

  • Chalk out the major goals of your child’s life journey like higher studies, admission in a foreign university or starting a business
  • Evaluate the financial need to take care of the above milestones
  • Depending upon your child’s life plans try to evaluate the plan term and align it with the milestone years of your child’s life
  • Once you have jotted down the above, you need to calculate the time that you have in your hand.
  • Fix the amount of the life cover and settle for the one that is sufficient to provide for immediate as well as future needs of your child
  • Keep your budget in mind. The goal should be to remain invested until the maturity of the plan without experiencing any financial troubles to meet your regular expenses.


A  child plan s specifically designed to meet the various financial needs of your child during different years of his life. However, in order to take a wise decision, you need to have a good knowledge of these plans, various benefits they offer and the liabilities or limitations. Though this primer can help you with our homework it is advisable to check with a certified and experienced financial planner before investing in the ideal plan that suits your budget and requirements.