How is a Child Plan different from a Term Plan?

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How is a Child Plan different from a Term Plan?

Term PlanChild Plan
In case the Policy Holder diesDeath Benefit Paid Policy EndsDeath Benefit Paid Policy Continues Rest of the Premium Paid by Insurer
In case the Policy Holder survivesNo Maturity BenefitMaturity Benefit

Do you really need a Child Plan?

Yes, you do!
Here’s why - at the present rate of inflation, the ever soaring cost of education worry us all. Today, a typical MBA course from a top business school can cost anything between 5-8 lakh. Taking into account the present inflation rate, the education cost will only rise in the future.
So, 10 years from now if your child gets keen to pursue MBA, you’ll need to get him at least 25 lakh for the same. Apparently, the cost will be unbearable until you start planning for your child’s education today. That’s where the best Child Plan acts as a savior of the day and helps you out.

Features and Flexibility of a Typical Child Plan
Work out the detailed specifications of the needs you are looking to fulfill through a Child Plan. Here are the key parameters you should look for-
Premium Amount – It more or less depends on the Sum Assured and Maturity Amount you choose.
Mode of Premium Payment -
  • Regular premium – As the name implies, the premium is paid on a regular basis. This can be yearly, half yearly or even quarterly.
  • Single premium – The premium is paid as a single payment.


Sum Assured -The thumb rule to follow is that the Sum Assured should be around 10 times your present income.
Policy Term - An ideal Policy Term for a Child Plan is the time you think your child needs to get on his feet. If your child is 10 years old, your policy term should be 8 years.
Maturity Amount - Sit with your financial advisor and taking into account the inflation rate and other such factors, work out a Maturity Amount that you would require at the end of the Policy Term. Maturity Amount can be received as a lump sum or in a frequent period of 5 years.
Waiver of Premium – This is a kind of rider that comes inbuilt in Child Plans. However, if this is not a part of the policy, it is always advisable to opt for the same. In case of death of the insured, this rider enables the policy to continue by passing off the financial burden to pay the rest of the premium to the insurer.
Partial Withdrawals - Some parents prefer withdrawing chunks of Maturity Amount at pre-fixed intervals instead of getting a lump sum amount at one go. The intention to opt for this feature is to meet the financial needs of your kid at the key moments in his life.
Riders and Benefits – These are the add-ons that make your coverage financially and qualitatively more valuable -
  • Premium Waiver Benefit
  • Accidental Death and Disability Benefit
  • Critical Illness Rider Benefit

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