In Unit-linked plans, the investment risk in the investment portfolio is borne by the policyholder

A proper financial plan ensures financial support at every milestone of your child's life. Child insurance plans are specially structured to meet a child's financial needs. Hence, to help your child fulfil all their life goals, it’s advisable that you invest in a child plan.

However, before you opt for a child insurance, you need to understand the full scope of such insurance policies. Here are the benefits of a child insurance plan:

• Financial protection

  Your income provides your child with every comfort and security in life. However, in case of an unfortunate event that causes the financial support to stop, a child plan acts as a safety-net. It offers life cover^~ providing a lump sum payout in case of eventualities. This sum of money is specified when you buy the policy and can cover your child's needs in their growing years

• Investment component

  Along with life cover^~, child insurance plans also provide an investment component. And ULIP child plans enable you to leverage the capital market's potential for high returns
  
  As per the Ministry of Statistics and Programme Implementation, India's inflation rate from 2012 to 2020 averaged at 6.05%. ^[1] Such data shows that investing in the equity market can bring inflation-beating returns. And ULIPs act as a bridge between such tax-saving equities and your investment goals
  
  You can also spread your investments across equities, debt bonds, or hybrid funds, as per your risk-bearing capacity. Such diversification minimises the effect of market volatilities. Moreover, if your funds don't give expected returns, you can switch to other better-performing funds
  

• Lump sum amount on maturity

  Child plans offer a lump sum amount as maturity benefits at the end of the policy term. You can select a maturity date as per the time frame matching your child's future need for funds. Throughout the tenure, your investment grows into a tidy corpus, enough to finance your child's aspirations
  
  However, child policies also offer a unique feature. Even if an unwanted event occurs and the insurer pays the benefit, the plan does not expire. The insurance provider waives off all future premiums. The funds continue to grow until maturity. When your child is ready for college admission or other key life-stage events requiring funds, they receive the maturity proceeds
  
  This feature is a distinct advantage over direct investments in mutual funds. In the case of an unforeseen incident, further investments in the policy stop in the direct method. In case of a child insurance plan, the insurer continues to invest on your behalf. Thus, with these plans, exigencies cannot upset your child's potential for growth

• Partial withdrawals

  ULIP child plans allow you to withdraw a part of your funds to meet your child's urgent requirements. After the lock-in phase, you can cash out some of your units and pay for school fees or sudden medical expenses, if any

• Tax^* benefits:

  Child plans are life insurance policies. Thus, the premiums are eligible for tax benefits. Under Section 80C of the Income Tax Act, 1961, you can claim deductions up to ₹ 1.5 lakh for your child insurance premiums
  
  Also, the payouts are exempt subject to Section 10(10D). This facility ensures that your child's funds are not eroded by taxation

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