Here’s what you need to know about child insurance and term insurance.
As a parent, it's natural to worry about your child’s future. You want them to get the best education and quality of life, even if you're not around. Financial planning helps protect your loved ones if something happens to you.
Child insurance and term insurance are two popular products for parents. However, many may be unsure about choosing between them. You can learn about these plans and their differences in the following sections.
A child insurance plan serves as both an investment and life insurance cover. This can help ensure your child's future well-being. Many child insurance plans are currently available in the market. Here, parents are the primary policyholders, and children are the beneficiaries.
The investment component helps cover various costs based on the returns earned. These can be related to your child’s higher education or marriage, among others. Meanwhile, the life insurance component secures your child’s financial future. This is applicable in the event of your sudden death.
Term insurance is a life insurance produdt. It primarily secures your loved ones’ finances in your absence. Typically, term insurance provides a lump sum amount to the beneficiaries of the policy after the policyholder’s death.
Unlike a child insurance plan, you can buy the policy at any stage of your life and customise it as you expand your family. To this end, insurers in India allow you to enhance the scope of the policy with rider benefits.
Here are the main differences 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 insurance plan will depend on the coverage selected and benefits. Moreover, the insurer continues to invest in the policy after your death. Therefore, the child insurance plan premiums tend to be more compared to term insurance. |
Term insurance is a comparatively affordable life insurance product available in the market. |
Sum Assured |
The policy pays a lump sum benefit to the children after your death. |
Term insurance provides a lump sum to children and beneficiaries after your death. |
Payouts |
Child insurance plans provide funds 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 some child insurance plans. The funds obtained can be used to meet any financial obligation. |
You cannot make partial withdrawals with term insurance. However, you can opt for critical illness cover. Under it, the insurer pays a lump sum upon diagnosis of a critical health condition. The funds obtained can be used to cover the treatment and hospitalisation expenses. |
Tax Benefits |
The premiums paid towards child insurance can be claimed for tax deductions. This is applicable 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 up to ₹1.5 Lakhs. This is applicable 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 deductions up to ₹25,000. This can be done under Section 80D of the Income Tax Act, 1961. |
If you solely want to contribute towards your child’s financial security, investing in a child insurance plan may be beneficial. However, if you're going to financially safeguard your entire family in your absence, term insurance could be an ideal choice.
You can buy term insurance plans at Bajaj Markets. Here, you can benefit from various features. These include extensive coverage, rider benefits, affordable premiums, and more. Moreover, you can purchase term plans using the Bajaj Markets App at any time and anywhere.
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