How much to invest in a Child Insurance Plan? What age to Buy?

How much should I invest in a Child Insurance Plan What age to Buy

How much should I invest in a Child Insurance Plan, is the very first question that every parent wants to know when they start thinking in some form about buying a child insurance plan. There are many questions that come to my mind infact and I hope my post helps you get some of those answers.

Let’s first understand what is a Child Insurance Plan

Child Plan or rather Policy is a saving cum insurance that I build over a decade or so, to secure a financial future for my child. This lump sum amount can be used for various life stage needs of the child. However more relevant in today’s times is utilizing this dedicated pool for funding higher education such as under grad fees, post graduate education abroad etc.

Why buying a Child Insurance plan in early years is better? How much to invest?

It’s no secret that cost of education is on rise in India. A four-year college fees for engineering combined with 2 year post graduate course can cost anywhere between 10 to 20 lakhs per child. The cost goes exponentially four to five times when sending for studies abroad. 

If I invest say Rs 4000 per month for a tenure of 20 years, I will receive about 20 lakhs at the end of the tenure. These are approximate values, but it gives a sense about the financial commitment we are trying to decide upon. This lump sum of 20 lakhs could provide requisite funds at the exact right time that I may need, without feeling any sudden financial burden.

Benefits of starting investing early

Benefits of investing early in Child Insurance

There are many benefits of starting early I feel. An early start, helps keep the premium really low and many times it may not even pinch. A couple’s expenses are typically lower in the initial years, thanks to better health, double income families and lesser responsibilities of home loans, parental support and the likes. Compare that to when we start once the child is say 10 years, we have may need to opt in for a 12k monthly premium to generate the same corpus owing to lesser duration of time remaining and notional loss of tax-free interest accumulation. 

Starting early makes Child Insurace extremely affordable and doable.

Also read How to Find Child Plan That Suits YOU + Best Child Plans in India

What age to Buy?

At birth, they say! But then incase that’s missed in all good intent, its best to buy one as early as possible.

Benefits of Child Insurance Plan

What benefits does a Child Insurance cover

Here are some additional benefits of Child insurance plan that may further help you arrive at the right decision.

Tax benefit of Child Insurance Plan

The interest and income earned on Child insurance plan is exempted from tax in India. Additionally, the premium that is invested annually in the plan is also eligible for tax dedication.

Can a Child Insurance Plan be used as Collateral for Educational loans?

Yes, that’s the good news. If you child needs to take a personal or educational load to pursue higher studies, a child insurance plan is accepted by all banks as a collateral.  

How can Child Insurance plan be utilized in other ways?

Apart from building a pool to fund higher education without any burden on parents, a chid insurance plan can also be utilized for other purposes.

During the policy tenure, if the child falls sick and needs a lumpsum amount, this money can be utilized for providing a good medical treatment.

If the insured has opted for a premium waver rider (which is an additional feature), the company will provide a premium waiver incase the parent passes away during the policy tenure.

A few child plans also offer a provision for regular income to the child, about 1% of the sum assured.

Good news is, this amount can also be utilized for bearing the child’s marriage expenses.

What are the Best Child Insurance Plans in India?

Coming up on my next post!

In short, a child insurance plan helps us prepare systematically and well enough in advance so that we can give our kids the right set of  wings to fly, when they need it the most.  

Have you been confused or in dilemma about buying child insurance for your little ones? Or if you have bought one already, what age was your child when you bought the child insurance plan? I would love to hear your thoughts in the comments below.

PS: Author has worked in the insurance industry before taking a deep dive into the world of blogging.

LOVED THIS POST ON WHEN TO BUY CHILD INSURANCE PLAN

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You may also like to read My Kadam Chhota, Change Bada Moment, Is there any point in buying so many toys, one after the other? and Can custom-made jewellery be actually cheaper yet BETTER than store bought ones?

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8 Comments

  1. This is a very important post and very informative. I am sure it would be useful for young parents out there. It is always necessary to start early.

    Like

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