What is a child education plan?
A child education plan combines two financial products into one. It gives you the benefits of savings along with insurance. Investing in a child's education plan can help you prepare for your little one's future education needs and, at the same time, create a financial safety net for them in your absence.
Types of child education plans
Below are some of the best child education plans in India:
ULIPs
Refer policy document for T&C
Unit Linked Insurance Plans (ULIPs) offer market-linked investment options such as equity, debt, hybrid, and index funds that allow you to build long-term wealth for your child's education and future needs. Along with wealth creation, these plans also include a life cover1 that ensures your child's financial security in your absence.
Endowment plans
Endowment plans combine savings and insurance. They offer a low-risk way to prepare for your child's future by providing guaranteed benefits at maturity along with life cover1 throughout the policy term.
Guaranteed return plans
A guaranteed2 return plan offers assured payouts at maturity. These low-risk plans also include life insurance benefits and give you dual advantages of financial security and guaranteed returns.
Government schemes
Several government-backed schemes help parents secure their child's future. Options such as the Sukanya Samriddhi Yojana (SSY), Savitribai Jyotirao Phule Fellowship for Single Girl Child (SJSGC), PM CARES for Children Scheme and others are some of the best child education plans backed by the government.
How do child education plans work?
Here's how a child's education plan works:
Premium payments
Child education plans operate on regular premium payments. You pay the premium in fixed instalments, monthly, yearly or as chosen. A portion of this premium is invested in funds or savings instruments, while the remaining amount goes towards providing life insurance coverage.
Lock-in period
Some child education plans, especially ULIPs, may come with a lock-in period. While not all plans have it, those that do require you to stay invested until the lock-in is over.
Maturity benefits
At the end of the policy tenure, child education plans offer maturity benefits. This includes your accumulated savings or investment returns, which can be used to fund your child's education.
Life cover payout
Most child education plans, including ULIPs, endowment plans and guaranteed return plans, offer a life insurance component. If something happens to the parent during the policy term, the child receives a life cover payout.
Partial withdrawals
Many child education plans allow partial withdrawals after a certain period. This helps you access funds during emergencies.
Why is a child education plan important?
By investing in a savings plan for the child, parents can deal with costly education fees and inflation in prices, or any uncertain event. More importantly, your child will be financially protected at any point of time during his or her education.
It is essential to choose the right child education plan as it gradually develops into a support system for fulfiling your child’s future needs. He or she will continue to be under a security blanket in the present, and even in your absence. After all, a secure future is one of the greatest blessings you can give to your child!
Why should you invest in a child education plan?
Investing in a child education plan allows you to prepare for your child's future needs. These plans can help you outpace inflation, save for higher education and marriage expenses and be ready for financial emergencies. They also eliminate the need for student loans and allow your child to pursue their goals without being worried about financial constraints.
What are the benefits of child education plans in India?
Below are some benefits of using child education plans:
Detail future security
Child education plans offer your child comprehensive financial security. The savings and investments component allows them to pursue their goals, while the insurance part secures them in the absence of their parents.
Waiver of premium on parents' death
Refer policy document for T&C
In the unfortunate event of the parents' absence, these plans waive all future premium payments. This ensures that the child continues to receive financial protection without having to pay the premium.
Flexible payouts
Child education plans offer flexible payouts that can be customised to suit your family's requirements. You can take the money in instalments or as a lump sum, depending on your exact needs.
Tax* benefits
Some of the best investment plans for child education in India qualify for tax* benefits under The Income Tax Act, 1961. ULIPs, endowment plans, guaranteed return plans, SSY and many others offer tax* benefits that help you save more.
How does a child education plan secure your child's future?
A child education plan secures your child's future with a combination of savings and life cover1. While the life cover protects your child in case of an unfortunate event, the savings portion helps them cover their financial needs, like education fees, higher studies, housing, healthcare, marriage or any other major life need.
These plans are designed to help parents systematically save and simultaneously safeguard their child's financial security, ensuring that their child's future goals are protected.
How to choose the best child education plan in India?
Below is a guide to help you choose the best child education insurance plan:
- Start by evaluating your child's goals and the estimated education costs in their preferred stream or career path
- It is important to factor in inflation in that field, as education expenses continue to rise every year
- Next, assess your own income capacity and risk appetite so you can select a plan that you can comfortably invest in over the long term
- Take time to research and compare different child education plans and understand their premium options, policy terms, payout structures and other key features
- Evaluate the life cover offered by each plan to ensure your child remains financially secured even in unforeseen situations
- Once you have a clear picture of these factors, you can select the best child education insurance plan that aligns with your family's needs and future goals
What are the key factors to consider when choosing a child education plan?
Below are some key factors to consider when selecting a child education plan:
Sum assured
Make sure you check the maximum sum assured offered by the plan. Choose a plan that provides a sufficiently high sum assured to cover your child's future needs in your absence.
Premium waiver
Check whether the plan includes a premium waiver feature. This ensures that if something happens to you, your child does not have to pay future premiums and the policy continues without interruption.
Partial withdrawal options
Emergencies can arise at any time, so maintaining liquidity is important. Look for plans that allow partial withdrawals before the policy tenure ends. This can help you manage urgent financial needs.
Flexibility in payment
Flexibility in premium payments, such as choosing annual, semi-annual, quarterly or monthly options, can help you customise the plan according to your financial comfort.
Company credibility
Ensure that the insurance company offering the child education plan is credible, financially stable and trustworthy. Avoid unreliable providers when securing something as important as your child's future.
Claim settlement ratio
Review the insurer's claim settlement ratio to assess how reliable they are at settling claims. A high claim settlement ratio can indicate better reliability and protection for your family.
What makes for a good child education savings plan?
The best child education savings plan is one that provides inflation protection, a reliable life cover and convenient savings or investment options through regular premium payments. The right plan should help your money grow at a pace that keeps up with rising education costs while also securing your child financially in your absence.
Once you find a plan that meets these criteria, start early and invest consistently so you can benefit from the power of compounding and build a strong financial support for your child's future.
What are the key features of a high-rated child education plan?
Below are some features of a high-rated child education plan:
Customisable premiums
A good child education plan allows you to customise your premium payment mode based on your financial comfort. You can choose to pay monthly, quarterly, semi-annually, annually or even opt for a single lumpsum investment.
Flexible term
These plans offer flexible policy tenures, giving you the freedom to choose a long- or short-term plan depending on your child's age and future financial milestones.
High claim settlement ratios
High-rated child education plans are backed by insurers with high claim settlement ratios. This ensures quick and timely claim payouts when your family needs them the most.
Add-on riders
You can enhance your plan's protection by adding riders such as waiver of premium, accidental death benefit, critical illness cover and more, depending on what the insurer offers.
Guaranteed or market-linked returns
Based on the type of plan you select, you can choose between guaranteed returns or market-linked returns for potentially higher growth.
What are the tax* benefits of child education insurance plans?
Child education plans, such as ULIPs, endowment plans, guaranteed return plans and similar options, offer valuable tax benefits under The Income Tax Act, 1961. You can claim deductions on the premiums you pay under Section 80C up to a limit of ₹ 1.5 lakh per annum. Additionally, the maturity benefits or death benefits received from these plans are exempt from tax under Section 10(10D), provided the policy meets the conditions specified in the Act.
Frequently asked questions - Best child education plan online in India
What is the minimum age to buy a child plan?
Most insurers allow parents between 18 and 65 years to buy a child education plan. However, the exact age criteria may vary depending on the specific policy.
Can child plans be customised?
Yes. You can customise features such as the policy tenure, premium payment mode, payout structure, life cover amount and even add riders to enhance protection.
How soon can you withdraw from a plan?
Partial withdrawals are typically allowed after the lock-in period, depending on the plan. Otherwise, full benefits are available at maturity.
Are child plans tax-free*?
Tax* benefits depend on the type of plan. Premiums may qualify for Section 80C deductions, and maturity or death benefits may be exempt under Section 10(10D) if conditions are met.
What documents are needed?
To purchase a child education plan, you generally need identity proof, address proof, income proof (like salary slips) and KYC documents such as Aadhaar and PAN.
How does a premium waiver work?
A premium waiver ensures that if something unfortunate happens to the parent during the policy term, all future premiums are waived, and the plan continues without interruption, so the child remains financially protected.
