Child plans help you save for your child's education and future. Learn the difference between insuring the child and insuring the parent, and how premium waiver works.
Every parent dreams of giving their child a good education, a strong start in life and, one day, a well-planned wedding. Child insurance plans help you save for these goals in a disciplined way, while also building in protection in case something unexpected happens.
But "child plan" can mean two quite different things, and it is important to understand the difference.
Two ways to plan for your child
1. Policy on the child's life
Here the child is the life assured, and the parent or grandparent is the proposer who pays the premiums. The policy is designed to pay money at the child's key ages, such as 18, 20 or 25.
Points to know:
- For very young children, life cover usually starts later, not from day one. In several LIC child plans, if the child is under 8 at entry, risk cover starts 2 years from the start of the policy or on the policy anniversary after the child turns 8, whichever is earlier.
- When the child turns 18, the policy vests in the child, meaning the child becomes the owner of the contract.
- The main risk to the child's goal is that the parent may not be there to keep paying premiums. This is where the premium waiver rider comes in.
2. Policy on the parent's life
Here the parent is the life assured, and the policy is built around the child's future goal. If the parent dies, the plan continues to support the child. For example, under LIC's Jeevan Lakshya (733), if the policyholder dies during the term, the family receives a yearly income of 10% of the Basic Sum Assured until maturity, and then a lump sum at maturity, so the planned goal is still met.
This approach directly protects the child from the real financial risk, which is the loss of the earning parent.
What is the Premium Waiver Benefit rider?
A Premium Waiver Benefit (PWB) rider is an add-on you can choose when the policy is on the child's life. If the proposer (parent) dies during the premium paying period, the future premiums are waived, as per the rider's terms. The policy continues and the child still receives the planned benefits.
This rider costs a little extra, but for a policy on a child's life it is often worth considering. Learn more in our guide to insurance riders.
Milestone payouts
Many child plans pay money at fixed ages to match typical expenses:
| Child's age | Typical need |
|---|---|
| 18 | College admission, coaching |
| 20 to 22 | Ongoing college or professional course fees |
| 25 | Higher studies, starting a career, marriage |
Some plans pay in parts at these milestones (money back style), while others pay one lump sum at the end.
A simple example
Illustration only, not a quote.
Priya's parents buy a child money back policy on her life when she is 5, with a Basic Sum Assured of ₹5,00,000. Under a plan that pays 20% at ages 18, 20 and 22 and 40% plus bonuses at 25:
- At 18, 20 and 22, Priya receives ₹1,00,000 each time, useful for her college fees.
- At 25, she receives ₹2,00,000 plus the bonuses added to the policy.
- If her father, the proposer, had opted for the Premium Waiver Benefit rider and died while premiums were still due, the remaining premiums would be waived and these payouts would continue.
Bonuses are declared by LIC and are not fixed in advance.
How to choose the right child plan
- Protect the parent first. Make sure the earning parent has adequate term insurance. A child plan is not a substitute.
- Match payouts to goals. Choose milestone payouts if you expect costs at several stages; choose a lump sum if you have one big goal.
- Add the premium waiver rider where the policy is on the child's life.
- Pick an affordable premium. Stopping early can mean getting back less than you paid; see surrender value and paid-up value.
- Start early. A longer term gives more time to build the fund.
Tax treatment depends on prevailing tax laws and the regime you choose.
Which LIC plans are of this type?
LIC's child-focused options include LIC's New Children's Money Back Plan (732), LIC's Jeevan Tarun (734) and LIC's Amritbaal (774), all on the child's life with an optional Premium Waiver Benefit rider (in Amritbaal, under limited premium payment), and LIC's Jeevan Lakshya (733) on the parent's life. Browse more on our endowment plans and money back plans pages.
Planning for your child's future? Get a premium estimate or talk to us.