Inclusions and Exclusions in Child Life Insurance Plans

A child insurance plan allows monetary security to your child by helping you accumulate a lump sum amount over a period of time. Let us read about the inclusions and exclusions of a child insurance policy.

If you are willing to secure the future of your children financially, a child life insurance plan is the best investment for the purpose. A child insurance plan is a twin benefit plan that offers both investment and insurance.  Thus, it allows financial safety to your kids by creating a corpus through the term of the policy along with providing the security of life insurance. The corpus received at the time of maturity of the plan can be used to incur the expenses of their higher education, career goals as well as their marriage expenses.

Another significant benefit of a child insurance policy is that it continues even if the parents or the policyholder dies in an unfortunate event during the term of the policy. So, in this case the insurer invests the premium amount on behalf of the policyholder and offer the child total benefits at maturity as per the plan. Hence, the security that you aim for your child with a child insurance plan stays intact and the benefits are received at maturity. Thus, the child insurance plans allow security of higher education to your kids when they reach college.

Let us take a look at the inclusions and exclusions of child insurance policies in India.

Things Covered under Child Life Insurance Plans – Inclusions in Policy

1. Life Insurance (of Policyholder) – Most child insurance plans allow life coverage to the policyholder. In fact, life insurance is a vital part of Child insurance policy that ensures that the dreams of the child are protected even if something happens to the parents. Thus, even if the parents die and cannot pay the premium of the policy, it still continues till maturity and allows the beneficiary to receive the complete amount as promised.
2. Goal Protection (of child) – Since child plans continue even after the demise of the parents, the career goal of the child is protected. So, even if the premiums stop coming due to the death of the policyholder/parents, the insurer continues the plan and allows the child to receive benefits at the end of the policy term. This way, the child can accomplish his/her career goals even if the parents are not there or if the parents cannot make premium payments due to certain disability.
3. Systematic Withdrawals – Another inclusion of child insurance plans is that it offers the option of systematic withdrawal from the plan. Thus, after a certain period of the policy (towards the end), the child insurance plan enables the parents to withdraw money to meet certain important financial requirements if any crisis arises.
4. Bonus Additions – Besides the above benefits, the child insurance policies also allow additional bonus to the beneficiary of the plan. These bonuses are awarded for staying invested through the long duration of the policy. This feature is similar to an ULIP with the only difference being that ULIPs offer loyalty and wealth booster bonuses, while Child plans allow annual bonuses, which are paid along with the maturity amount.
5. Loan facility and Partial Withdrawals – This is again an important benefit of a child insurance plan. Under this benefit, the policyholder can apply for a loan against  the plan. Moreover, they do not need to break the investment for getting the loan. Some child policies also allow the policyholder to withdraw a partial amount after completing the lock-in period of five years.
6. Riders (Add-ons) – Most child insurance policies allow the policyholder to avail several riders such as critical illness rider, premium waiver rider and accidental death rider etc.  In some policies, the premium waiver is offered compulsorily.
7. Choice of investment – Most child insurance plans invest a part of the amount paid as premium in different market-linked investments.  Your insurer will offer you options of different funds like equity, debt etc. that you can choose from as an investment tool of your child plan.
8. Premium Waiver – Under the premium waiver benefit the plan continues even if the parents or policyholder dies during the term of the policy and allows the beneficiary to receive benefits during maturity.
9. Lump Sum Amount – After the  death of the policyholder, the insurer offers a corpus as death benefit that includes the entire amount in a single payment. This money can be used to pay off any debts of the policyholder or for other purposes.

Things not Covered under Child Life Insurance Plans – Exclusions in Policy

There are certain situations under which the insurance company does not provide the death coverage under a child insurance plan. The following are such exclusions of child insurance policies:

• If the policyholder dies due to suicide or self harm within 1 year of buying the policy, the nominee does not get any claim amount
• If the policyholder dies while taking part in risky sports like racing, skydiving, etc, the insurance company does not pay claim
• Also, if the insured dies due to overuse of drugs or alcohol, the nominee will not get any benefit
• If the insured dies due to an accident that occurred while the insured was under the influence of drug/alcohol, the scope of receiving benefit by the nominee becomes nil
• Finally, if the policyholder dies because of involvement in any criminal or illegal activity, the claim amount is not paid