Perhaps the only people that love a child as much as, or even more than, the parents, are the grandparents. The love that grandparents have for their grandchildren is unconditional. As a grandparent, you would want the child to live a healthy and happy life and pursue their dreams without any worries, especially ones of the financial sort. One efficient way to achieve this is to buy life insurance for your grandchildren. With insurers in India branching out various products, the domain of child insurance plans has also grown considerably in the last few years.
How does a child insurance plan differ from regular life insurance?
While regular term insurance plans are curated to meet the demands of a family’s needs, a child plan is made considering the financial objectives that you may particularly have for children. A child insurance plan assures you that if you, unfortunately, pass away, your grandchild will not have to suffer any financial miseries. The pay-out/s from your insurance can help the child fulfil the financial requirements at different stages of their life, such as secondary school fees, higher education costs, career investment plans, marriage, and so on.
Types of life insurance plans available for children
Pure protection plans
In these plans, you pay a premium that goes towards building the life cover. The money you provide is used solely for this purpose and nothing else. In the event of your demise, this life cover is provided to your grandchild. In certain cases, the plan may continue until it reaches its maturity with the insurer taking care of the premium payments in your absence. If you want to get an understanding of the premium, you might have to pay for a protection plan, you can take the assistance of the life insurance premium calculator.
ULIP plans
The premiums of these plans are partly used for building the life cover and partly invested in financial instruments that bring returns. If you are looking for market-linked gains, then this is an efficient way to achieve them. As compared to traditional insurance plans, a ULIP offers much more lucrative returns. These returns come, however, with risks. You can choose to invest in equity funds, debt funds, or a balance of both, depending on your risk appetite. The high returns on the plan provide a much larger financial cushion for your grandchild to help them later in life.
Important things to consider when you buy life insurance for grandchildren
The premiums may be on the heavier side
One of the most important determinants of the premium is the age of the policyholder. The higher the age, the more will be the premium. Since grandparents are usually aged citizens, the chances of them having to pay an increased premium are high. However, this should not stop you from securing the future of your grandchild.
Consider buying the waiver of premium add-on
The waiver of the premium features can be availed with the purchase of the add-on. In the event of your demise and other conditions specified in the policy, this add-on allows the cessation of premium payments from your side. The child insurance plan, however, continues until its maturity. If you want to know the hike in your premium, you will incur with the purchase of this rider, you can take the help of a life insurance premium calculator.
Plan the tenure accordingly
The tenures of a child plan in India usually range from around 25 to 40 years. So, if you are buying a plan with a tenure of 30 years for your grandchild who is now 3 years old, the plan will mature when they turn 33 years old.
Therefore, when you buy a child insurance plan for your grandchild with a particular objective in mind, remember to choose the tenure accordingly. For instance, if you want to secure finances for your grandchild’s higher education abroad, then you may want to choose a tenure that ends when they are 20 to 25 years old.
Take advantage of the tax benefits
Under Section 80C of the Income Tax Act, the premiums of a life insurance policy are eligible for tax deductions up to a maximum of Rs 1.5 lakhs. If you are opting for the old tax regime, then remember to file for this deduction in your ITR.
We hope this article has been an informative read and that it helps you buy life insurance suitable for you and your grandchild.
