Why Should Parents Consider Investing in a Child Plan?

Are you concerned about your child's education planning and whether they have the resources to succeed? As a parent, you naturally want to give your child the best opportunities. Proper education planning can ensure that your child has the tools, support, and chances to thrive.

That’s where Child Plans come in. 

These are special investment plans designed to help you save and grow money for your child’s education and other needs. They act like a safety net, giving you peace of mind while ensuring your child has the financial support they need as they grow up.
By choosing a Child Plan, you're taking charge of their future. It’s not just about saving money—it’s about preparing for their dreams, whether going to college, starting a business, or buying a home. With things changing so quickly, a child plan is one of the smartest ways to ensure your child has the support they need to thrive tomorrow.

What is a Child Insurance Plan and How Does it Work?

A Child Insurance Plan is a smart way to secure your child's future while giving you peace of mind. It works like a financial safety net that combines life insurance with smart investments, all focused on your child's needs.

Here’s how it works:  

As a parent, you buy the plan and pay regular premiums. These premiums do two things: they provide life coverage for you and invest money for your child’s future. Think of it like planting a tree that grows as your child grows!

For example, if a parent starts a plan when the child is 5 years old and the aim is to cover their college costs at 18, the parent could pay ₹10,000 every month for 13 years. By the time the child is ready for college, the plan will have accumulated upto ₹15,60,000 offering a ready amount to help with expenses.

What’s great about Child Plans is that they provide protection. If something happens to you, the plan keeps going. In the unfortunate event of the policyholder or payor’s demise, the insurance company waives future premiums and continues to grow the investment until it matures. This means the plan’s outcome is protected, no matter what.

Plus, Child Insurance Plans are flexible. You can choose whether you want a lump sum payout for big expenses like college tuition or regular payments for ongoing costs. You can pick the option that works best for your family.

A child plan isn’t just about saving money—it’s a promise to your child’s future. It gives you the confidence that you’re doing everything possible to support their dreams. While you nurture their growth, a Child Insurance Plan works alongside your efforts to build their financial future.

Benefits of a Child Insurance Plan

As a parent, securing your child's future is one of your most important goals. Whether considering their education, marriage, or overall well-being, a Child Insurance Plan can help you achieve that peace of mind. 

Here’s why these plans are such a smart choice:

1. Assurance of financial security

As a parent, you want to give your child the best possible start in life. Part of that means preparing for their future and ensuring they have the financial resources to pursue their dreams, including higher education. That's where child insurance plans come in. For instance, Shriram Life Insurance has options called savings plans, such as the AIP (Assured Income Plan) or ECP (Early Cash Plan). Such plans can greatly help parents in a couple of ways: 

First, investing in these plans can provide a safety net for the child's future education expenses. With the rising cost of higher education, having a dedicated source of funds can be incredibly valuable. Second, these plans also provide financial security, allowing you to focus on other aspects of your child's development, knowing that your ward’s future education is well-funded. 

2. Help save for future goals

A child insurance plan has a dual purpose: an investment and an insurance plan. It provides a financial safety net for your child and helps you save and grow money over time. For example, let's say you invest in a child insurance plan that provides both life coverage and a savings component, such as the New Shri Vidya plan.

You pay a monthly premium; part of that goes toward securing a life insurance benefit for your child’s future. In addition, another portion of your premium is invested in building funds over time, providing you with guaranteed money back in the last four policy years. This savings pool can later fund your child’s education, a down payment for their first home, or even their wedding. So, while you’re ensuring financial protection, you’re also saving for your child’s future goals, essentially killing two birds with one stone!

3. Flexible payout options

One key benefit of a child insurance plan is the flexible payout option, which allows parents to decide how they want to receive the maturity benefit. For example, you can receive the payout as a lump sum to cover major expenses like higher education or as installments to spread out the payments over time, ensuring you have funds when needed. 

For instance, the Shriram Life Premier Assured Benefit Plan provides this flexibility. This non-linked, participating savings plan allows you to save for the present while providing life insurance coverage for the future, making it easier to plan for future milestones, such as funding your child’s education or marriage.

4. Tax advantages

Child insurance plans in India provide great tax advantages, like tax deductions on premiums up to ₹1.5 lakh per year and tax-free maturity benefits. This means you can save a lot of money on your taxes while getting insurance coverage for your child. First, under Section 80C of the Income Tax Act, the premiums you pay towards these plans are eligible for tax deductions, allowing you to reduce your taxable income by up to ₹1.5 lakh per year. Additionally, the maturity benefits you receive, such as lump-sum payouts or bonuses, are generally tax-free under Section 10(10D), which makes these plans even more attractive. On top of this, some plans allow tax-free partial withdrawals (like Shriram Life Golden Jubilee Plan), and the premium waiver benefit is exempt from tax, making these plans a great option for both long-term financial planning and tax optimization.

Types of Child Insurance Plans

There are four kinds of Child insurance plans available in India. They are

Category 1: Traditional Child Endowment Plans

Traditional Child Endowment Plans are a straightforward option for securing your child's future. These plans provide guaranteed maturity benefits, life cover, and potential bonuses. They are ideal for parents who prioritize stability and fixed returns.

Category 2: Child Unit Linked Insurance Plans (ULIPs)

Child ULIPs are hybrid plans that combine insurance with investment. They provide flexibility by allowing you to choose from various investment funds. While this provides the potential for higher returns, it also comes with market risks. ULIPs are suitable for parents comfortable with multiple investments and seeking long-term growth.

Category 3: Child Money Back Plans

Child Money-Back Plans are designed to provide periodic payouts during the policy term and a lump sum at maturity. These plans are useful for parents who want to meet specific financial milestones, such as school fees or college expenses.

Category 4: Child Term Insurance Plans

Child Term Insurance Plans are pure protection plans that provide a lump sum death benefit to your child in case of your unfortunate demise. These plans are affordable and ideal for parents who want to ensure their child's financial security without the burden of investment risks.

There are two other additional categories based on the type of premium you choose to pay

Single-Premium Child Plan

A Single-Premium Child Plan provides convenience and peace of mind. By making a one-time lump sum payment, you eliminate the need for future premium instalments. This hassle-free approach ensures that your child's future is financially secure. Additionally, you get attractive discounts or reduced premiums by purchasing a single-premium plan.

Regular Premium Child Plan

A Regular Premium Child Plan provides flexibility in managing premium payments. Depending on your budget and preference, you can choose to pay monthly, quarterly, half-yearly, or yearly. This tailored approach lets you easily incorporate premium payments into your financial planning.

5 Compelling Reasons to Invest in a Child Plan

A child plan is a strategic financial tool to secure your child's future. Here's why you should plan your child’s future effectively:

1. Disciplined Savings:

Regular premium payments associated with child plans encourage disciplined savings. This habit can instill financial responsibility in you and your child. Another important but most ignored aspect of investing in a child insurance plan is the power of compounding. Over time, this can significantly amplify your investments, leading to substantial returns.

2. Life Cover:

Some child plans come with life cover, providing financial protection for your child in case of your unforeseen demise. This ensures that your child's future is secure, regardless of your presence.

3. Investment Potential:

Child plans, especially ULIPs, provide the potential for high returns through investments in various asset classes like equities, debt, and gold. These plans are professionally managed, with experienced fund managers carefully handling your investments to help generate competitive returns aligned with your financial goals and risk tolerance.

4. Early financial literacy

A child plan can be a powerful tool for securing your child’s financial future and instilling essential financial literacy from an early age. By involving your child in the decision-making process and tracking the growth of their investments, you can teach them valuable lessons about budgeting, savings, investing, and goal setting. Start by explaining the basics of the child plan, such as how money grows through investments, and allow your child to actively participate in decisions about how the money is allocated. This will help them to become more aware of how you handle money and safeguard their future.

5. Developing healthy money habits

Beyond just depositing and spending money, a child plan provides an opportunity to teach life skills beyond finances. It can help your child develop healthy money habits that will serve them well into adulthood.

Learning to manage money responsibly, save regularly, and make informed financial decisions makes them less likely to fall into debt or face financial struggles later in life. Moreover, having a financial foundation can give them a sense of security and confidence, knowing they have a backup plan for unexpected events.

By investing in a child plan, you're securing your child's future and making a wise financial decision for your family's overall well-being. Shriram Life Insurance provides trusted coverage and long-term security. Shriram Life Insurance provides various life insurance products designed to provide financial security for you and your family. With a focus on reliability and customer support, we help you confidently plan for the future. Our child plans are specifically designed to cover your child's education and financial needs.