Benefits of Child Insurance Plans

IndiaFirst Life
• 29 May, 2025

Every parent wants to secure their child’s future, especially when it comes to education and other major life milestones. With the right financial support and security, your little one can pursue their dreams and soar high. To enable yourself and your child to reach that stage, it is important to plan in the right manner. This is where child insurance plans come into play.

These plans help you build a safety net for your child's future while also offering life cover and other benefits. Let’s look at the main benefits of a child insurance plan and why it can be a good addition to your portfolio.

1. Continued Financial Protection for Your Child

One of the biggest benefits of child insurance plans is financial security. In case something unfortunate happens to the parent, the plan continues to work regardless. When the plan matures, the child will receive the benefits from the plan, which will give them the support they need to secure their future. As a parent, this type of life insurance plan can give you peace of mind as you can be assured that your child’s education and dreams are protected, no matter what happens.

2. Lump Sum Payout on Parent's Demise

In the unfortunate event of the policyholder's death, most child insurance plans provide an immediate lump sum amount to the nominee, who can be the child or guardian. This amount can be used to cover immediate financial needs or to continue the child’s education without disruption. This can protect the child from sudden financial hardship during an already difficult time.

Some plans also offer the option to receive the death benefit payout in regular instalments rather than a lump sum. It can be a good alternative, as it takes away the need to handle a large amount.

3. Maturity Benefit for the Child’s Future

With a child insurance plan, the child receives a lump sum amount when the policy matures. This can be used for education, starting a business, or any other important life event. This payout makes it easier for the insured’s loved ones to manage large expenses without having to take on debt.

You can use a child plan calculator to estimate how much your child might need in the future and choose a plan that aligns with that goal.

4. Waiver of Premium Benefit

Another important benefit of a child insurance plan is the waiver of premiums in case of an unforeseen event. If the insured parent passes away during the policy term, all future premiums are waived, but the plan continues. This means the insurance company will handle the remaining contributions. The maturity benefits will still be paid out to the child when the policy ends.

In some cases, the premium may be waived off if the insured suffers an accidental total or permanent disability that leaves them unable to work. This can ensure that long-term goals are not affected by a sudden loss of income.

5. Partial Withdrawals for Urgent Needs

Some child insurance plans, like Unit-linked Life Insurance Plans, allow partial withdrawals after a certain number of years. This feature is helpful when you face unexpected expenses, such as urgent medical treatment. These withdrawals can provide you with financial support during a difficult time without affecting the overall policy or long-term savings.

6. Tax Benefits**

One of the major benefits of child insurance plans in India is their tax efficiency. The premiums you pay towards a child insurance plan are eligible for deductions under Section 80C of the Income Tax Act, 1961, up to a maximum of ₹1.5 lakhs. This deduction is only available under the old tax regime. In addition, the maturity proceeds from the child insurance plan are tax-free under Section 10(10D), subject to prevailing tax laws. These tax benefits make a child plan a tax-efficient investment option for parents.

7. Potential Market-linked Returns

If you have the risk appetite for it, you can also opt for a child investment plan wherein your funds are invested in the market-linked funds of your choice. While the potential returns from such a plan can be comparatively high, they come with a higher level of risk. Hence, one should proceed with caution.

These benefits of child insurance plans in India make them a valuable part of your financial planning. They offer flexibility, life insurance coverage, tax benefits, and, most importantly, peace of mind. With a child plan, you can be certain that your child has all the resources they need to fulfil their dreams.

** Tax exemptions are as per applicable tax laws from time to time.

by IndiaFirst Life
Headquartered in Mumbai, IndiaFirst Life Insurance Company Limited (IndiaFirst Life), with a paid-up share capital of INR 754.37 crore, is one of the fastest growing private life insurers in India in terms of New Business IRP in Fiscal 2023. Our key differentiators are our simple, easy-to-understand products that are optimally priced. As of Sept 30, 2023, we offered 30 retail products, 13 group products along with six riders (across retail and group portfolios), along with policies under the PMJJBY scheme, catering to protection, savings, health and retirement needs of our customers, leveraging multiple distribution capabilities and augmenting various investment options. In all propositions under the categories of Participating Plans, Non-Participating Savings Plans, Non-Participating Protection Plans, Unit Linked Insurance Plans, Group Protection Plans, Corporate Funds Plans, Riders & PMJJBY form a complete suite of offerings that help our customers prepare for the certainties of life. Our products are easy to understand and optimally priced with a developed comprehensive risk management framework/policy.