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Difference between Child Insurance and Term Insurance

As a parent, it is natural to be worried about your child’s future. You’d always want to ensure that they receive the best, be it education and life, even in your absence. Every individual plans their finances in a way that the loved ones are financially protected if anything were to happen to them.

So, if you are planning to start a family soon or have just started one, what you need is an insurance plan that will help you secure your family’s financial future. When researching further you will realise that there are several insurance plans available that are designed to fulfil to your needs.

Child insurance and term insurance plans are two popular insurance products that help parents secure their child’s future. But many times, people get confused about whether they should invest in a child plan or term plan. So, to safeguard your child’s future, it is crucial to understand what these two plans are and the difference between them. Let us begin!

What is a Child Insurance Plan?

A child insurance plan acts as an investment and life insurance cover that helps in the well-being of your child’s future over time. There are multiple child plans available in the market. When it comes to child insurance, parents are primary policyholders, and the children are the beneficiaries.

The investment component in the policy helps cover the cost of your child’s higher education or marriage based on the returns earned. Whereas, the life insurance component secures the financial future of your child in the event of your sudden death.

What is a Term Insurance Plan?

Term insurance is a type of life insurance product that primarily secures the financial future of your loved ones in your absence. Here, the policy can come in handy to protect your child’s future as well.

Ideally, term insurance provides a lump sum amount to the beneficiaries of the policy after the policyholder’s death. The amount received can be used by the dependents of the deceased as and when needed. On the other hand, term insurance is also the most affordable life insurance product available in the market.

Unlike a child plan, you can buy the policy at any life stage and customise it as you expand your family. For that, the insurers in India allow you to enhance the scope of the policy with rider benefits. A term insurance plan secures the financial future of your children and other family members as well.

Difference Between Child Plan And Term Plan

The table below will help you understand the difference between child insurance and term insurance.

 

Child Insurance Plan

Term Insurance Plan

Type of Plan

Child insurance provides life insurance as well as investment benefits.

Term insurance is solely a life insurance product.

Premiums

The premiums for a child plan will depend on the coverage selected and benefits.

Also, the insurer continues to invest in the policy after your death. Therefore, the child plan premiums tend to be more compared to term insurance.

Term insurance is the most affordable life insurance product available in the market.

You can use the term insurance calculator to determine the premiums charged on your chosen coverage and benefits.

Sum Assured

The policy pays a lump sum benefit to the children after your death.

Much like a child plan, term insurance provides a lump sum benefit to the children and beneficiaries after your death.

Payouts

Child plans provide money to the children at specific intervals/milestones.

There are no payouts except for the death benefit received by your dependents.

Partial Withdrawals

You can make partial withdrawals with child insurance. The money obtained can be used to meet any financial obligation.

You cannot make partial withdrawals with term insurance. However, with critical illness cover, the insurer will pay a lump sum amount when you are diagnosed with a critical health condition. The money obtained can be used to cover the treatment and hospitalisation expenses.

Tax Benefits

The premiums paid towards child insurance can be claimed for tax deduction under Section 80C of the old income tax regime.

The payout/benefit received from the policy is tax-free under Section 10(10D) of the Income Tax Act, 1961.

The premiums paid toward term insurance can be claimed for tax deduction under Section 80C of the old tax regime.

The death benefit received by the beneficiaries is tax-free under Section 10(10D).

With critical illness cover on your term plan, you can avail addition deduction under Section 80D of the Income Tax Act, 1961.

Conclusion

Based on the pointers discussed above, you must now know the difference between child insurance and term insurance in general. If you solely want to contribute towards your child’s financial security, investing in a child plan is a wise decision. However, if you're going to safeguard your entire family (spouse, children, and parents) financially in your absence, term insurance is an ideal choice.

You can buy term insurance plans at Finserv MARKETS and benefit from features such as extensive coverage, rider benefits, affordable premiums, hassle-free claim settlements, etc. Moreover, you can purchase term plans using the Finserv MARKETS App at any time and anywhere.

You can read more about term insurance benefits by visiting Finserv MARKETS website.

FAQs

  • ✔️Between child plan and term plan, which one should I buy?

    In case you are solely looking to secure your child’s financial future, it is wise to invest in a child plan. However, if you want to extend financial security to other members of the family (your spouse and parents), term insurance is an ideal choice.

  • ✔️What is the maximum age to buy a child plan?

    Parents purchase a child plan for their children. Therefore, the child should be equal to or less than 18 years old to buy a child plan.

  • ✔️Can I withdraw from the child plan?

    Yes. You can make partial withdrawals with your child plan after the completion of five years. However, get in touch with your insurer to confirm the same.

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