5 Features of the Best Child Plans in India

As a parent, you want to give your child the best future possible, a good education, a safe environment, and opportunities to grow. However, life can be unpredictable, and it's important to plan for any financial challenges that may come your way. That’s where a child plan can help.

A child insurance plan is a mix of protection and investment. While you’re around, your money keeps growing to support your child’s goals. During uncertainties, the plan makes sure those goals are still achieved.

In this blog, let’s explore the child plan and its features that are truly valuable for your child’s secure and successful future.

What is a Child Plan?

A child plan is a life insurance-based investment plan that helps you secure your child’s future. It combines insurance and investment, so you can build a dedicated fund for your child’s future. With a child plan, you ensure your child’s dreams are protected during critical times.

Key Highlights of a Child Plan

• You get life cover along with long-term investment benefits

• You can build a goal-specific fund for your child’s future needs

• You can withdraw partially for key milestones when needed

• You can choose goal protection so the plan continues even after your untimely demise

• You can invest in equity, debt, or a mix based on your comfort level

• You enjoy tax benefits on your premiums and a tax-free maturity amount

5 Unique Features of the Best Child Plans in India 

Here are five unique features the best child plan has in India:

1. Appropriate Long-Term Investment Options: An ideal investment plan for the child should offer appropriate long-term or short-term investment options. Every investment option or asset class has a specific risk-return profile. Based on this risk-return profile, each investment needs a specific time to offer the best returns.
   Therefore, the ideal child plan will offer a long-term investment option or asset class, such as equity funds.
   However, as you get closer to your goal, you will need safer investment options to park your accumulated funds. Thus, the child plan should also have a fixed income or debt fund option, which you can utilise to keep your funds safe.
   The best child plan can offer all these asset classes and allow you to create a suitable mix as per your time to goal.
2. Goal Protection Feature: We have already highlighted that insurance is a necessary part of a good child's plan. However, simple life insurance, which gives a lump sum amount at the death of a parent, is not enough. The best insurance allows a child to achieve their goal for higher education and become independent.
   If the goal protection option is present in your child's plan, your family not only receives the life cover amount at death  amount to invest in the goal. The plan will mature at the intended time and pay the maturity value to the child.
   The amazing part is that between the death claim and maturity, the insurer will deposit all remaining instalments, as you would’ve done. Thus, your child will receive the amount you intended to receive at maturity.
3. Automatic Risk Management: When you are investing for the long term, i.e., 5 years or more, you have the opportunity to take a little more risk and get a higher growth rate. For example, you allocate a larger portion of your total investment to equity growth funds in the plan.
   Higher equity allocation will mean higher volatility. Since you cannot spend a lot of time managing your investments, you need automated portfolio strategies to keep your portfolio abreast.
   The best child plans will offer at least a few of these proven portfolio management strategies, such as:
   
   
   • Systematic Transfer Option: It transfers your lump-sum investment to equity fund(s), to provide rupee cost averaging.
   • Automatic Fund Rebalancing: It rebalances your portfolio between equity and debt based on market performance. For example, if you selected a ratio of 50:50 and due to the good performance of the equity market, it becomes 40:60 (debt: equity), the money will move from the equity fund to the debt fund until the balance is back to 50:50.
   • Safety Switch Option: This option gradually transfers all your funds from equity to debt in the last 4 years of your plan. This keeps your funds accumulated from equity safe as your plan matures.
4. Tax-Free Partial Withdrawal Option: The best child plan will let you withdraw from the accumulated corpus without tax liability or affecting the investment. You can make multiple partial withdrawals from such child plans and continue investing towards the next.
5. Lower Management Expenses: You would think that an investment product with features like automatic portfolio management, life cover and goal protection would be an expensive affair
   Goal protection premium provides the additional cover to your child plan and helps fund the due investment premiums after your untimely demise. Mortality and goal protection premiums depend on your age and health, which you can check while starting your investment in the plan

How to Make Your Child Plan Tax-Proof?

A child's plan is a long-term investment, and the capital gains on this investment can be significant; that’s why tax efficiency becomes important. Here’s a simple step you can follow:

Start with a sum assured that is more than 10 times your annual premium

For example, if you plan to invest ₹1 lakh a year, make sure the life cover is more than ₹10 lakhs. This helps you keep your investment tax-free even when you increase your contributions later.

Since child plans are life insurance policies, the maturity payouts remain tax-free as long as your annual premium does not exceed 10% of the life cover. You may want to invest more in future years, and this higher life cover will help maintain the tax benefits.

Using the best child plan lets you invest in your child’s future while ensuring tax-efficient returns.

Conclusion

Your child’s dreams deserve solid financial support, no matter what life brings. A child insurance plan ensures that you not only build a strong investment for their future but also protect those goals during uncertain times. With features like goal protection, tax benefits, and flexible investment options, the best child plan helps you stay prepared. Start today with Canara HSBC Life Insurance and give your child the confidence to dream big.