IMPORTANT ASPECTS OF CHILD INSURANCE PLAN AND ITS FUNCTIONS

IMPORTANT ASPECTS OF CHILD INSURANCE PLAN AND ITS FUNCTIONS
IMPORTANT ASPECTS OF CHILD INSURANCE PLAN AND ITS FUNCTIONS?

Let us look at the basic working of child plans:

Child Plans are generally designed to serve two purposes together – of an insurance product and of an investment tool. The product provides financial security to your child at all crucial stages of his/her life.

If you buy the plan, you will be the policyholder, while your child will be the nominee. However, in your absence, the insurance component ensures that your child, being the nominee, receives a substantial amount of money to be able to manage his/her finances seamlessly

Talking about the investment component, it helps to build a substantial fund to accumulate enough money to meet the necessary expenses in future like travelling abroad for higher education, getting admission and paying fees for a university abroad, marriage or setting up his/her own business.

With guaranteed financial stability, the parents will be able to concentrate on other aspects of their child’s growth and development.

IMPORTANT ASPECTS OF CHILD INSURANCE PLAN AND ITS FUNCTIONS

Get the child insurance plan from an insurance company that boasts of a high claim settlement ratio. This ensures of a smooth and quick claim processing and settlement in times of crisis. Let’s get acquainted with the claim process.

In case of an event for which a claim needs to be filed, inform the insurance company about the incident as soon as possible. This can be done by visiting the nearest branch office or calling at their toll-free number or sending an email

Also submit the claim form and give other details like particulars of the policy, the date and cause of the incident, name of nominee, etc.

Once the claim is registered, provide other supporting documents and reports

The company will appoint an assessor to verify the documents and the case

If approved, and no further investigation is needed, the claim benefit is transferred with 30 days of furnishing the documents

Important Aspects:

Always keep these important points in mind so that you understand child plans well and reap the benefits in the long run.

Start Early: When it comes to child insurance plans, the earlier, the better. It is good to start a child plan as early as possible. This gives the chance to create a larger corpus when the child grows up. The overall benefit of a child plan is visible when the investment period is longer as it gives higher returns.

Understand Terms and Conditions: Every child plan comes with its set of terms and conditions. Hence, before choosing the plan, check and compare the plans well to rule out any confusion after taking the plan. Select the plan as per your requirement and suitability.

Partial Withdrawal Clause: Everyone experiences an emergency or a crisis at some point in life. A partial withdrawal clause shields you against contingencies when there is a need for money on an immediate basis. If you have opted for partial withdrawal clause, you can withdraw a part of the money from the sum invested in the child plan to meet the unforeseen expenses.

Choice of Funds: Child insurance plans accumulate premium money from all policies and invest that amount in multiple investment instruments as per the policy. As parents, you need to be well informed about all the child plans available in the market and offered by your insurance company. Majority of child insurance plans come with systematic transfer plan and dynamic fund allocation options. These will help you to change the amount of investment made by the policy in equity and debt markets.

Difference Between General Insurance, Child Insurance & Life Insurance:

Life insurance provides coverage for your life. If a situation occurs wherein the policyholder has a premature death within the term of the policy, then the nominee gets the sum assured by the insurance company. It is one of the most important financial instruments. Child plans offer maturity benefits and give payouts during the crucial stage of children’s life.

Documents Required:

In order to make claims in case of any eventuality, keep the following documents in place to avoid any rejection.

Duly filled in claim form, Policy document, Medical certificate, Prescriptions, Diagnostic reports, KYC of insured and nominee, NEFT details etc…

Advantages of Child Plans:

Let us look at some of the advantages of getting child plans.

Fund for Child’s Education: The primary focus of a child insurance plan is to secure your child’s future. The funds accumulated over a period can be used for your child’s higher education, or can be utilised for important events like marriage. The cost of pursuing higher education is gradually rising and a child plan helps meet these needs. The best child plans also take into account the inflation as they offer benefits on total premium paid over the policy tenure on maturity.

Provides Income Protection for Child: This benefit is primarily for those children who start earning at a young age. It protects their income and provides the benefit of capital appreciation over the long-term for a child plan. This is mainly useful for child actors, performers, musicians, etc.

Collateral for Education Loan: The monthly savings would never be enough to meet the soaring cost of higher education, be it in India or abroad. Thus, arises the need for taking education loan. Child plans can help in securing a loan for higher education as they are allowed to be used as collateral for a loan as well as other child-related borrowings.

Financial Support in Absence of Parent(s): In case of the sudden demise of one or both parents, it is natural for the child to be shocked and shattered. Insurance companies provide a premium waiver rider if the policyholder passes away during the policy term of the child plan. However, this does not mark an end to the plan, and the policy does not lapse. In such cases, the child is entitled to a lump sum amount promised at the time of purchasing the child policy without paying the balance premium. The rider enables the policy to continue without any breaks or lapse wherein the responsibility of paying the balance premium lies on the insurer.

Riders or Additional Benefits: The riders can be availed on payment of extra amount. They extend the coverage by giving extra benefits. These riders help in case the parent passes away or becomes permanently disabled in mishap or accident or is suffering from or diagnosed with a critical illness mentioned in the policy. Here are some riders available with child insurance plans:

Income Benefit Rider

Waiver of Premium Benefit Rider

Accidental Permanent Total/Permanent Disability Benefit Rider

Critical Illness Benefit Rider

Accidental Death Benefit Rider

Tax Benefits: With child plans you can claim deductions in tax under Section 80C of the Income Tax Act. Also, you can claim tax exemptions under Section 10(10D) on the returns you get. Here, if the premium paid in any year does not exceed one-tenth of the basic sum assured, you can claim tax exemption for interest earned on the investment.

SBI Life – Smart Champ Insurance:

SBI Life - Smart Champ Insurance, a traditional participating child insurance plan, helps in securing your child's educational needs.

Key Features:

Annual Premium Range: 6,000 onwards

Entry Age: Child - 0 years, Proposer: 21 years

Key Benefits:

Payouts based on your child's age

Premium waiver benefit

SBI Life – Smart Scholar

Avail twin benefits of market-linked returns on your invested money and the security of life cover for your children with SBI Life - Smart Scholar.

Key Features:

Annual Premium Range: 24,000 onwards

Entry Age: Child : 0 years, Proposer: 18 years

Key Benefits:

Market-linked returns.

Periodic loyalty additions.

CLICK HERE TO KNOW MORE

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