Everything You Need To Know About Child Education Plans

Parenting comes with its own set of rewards and obligations. Parenting successfully is not an easy endeavor, but it can be done with the right decision.

As the cost of education continues to rise daily, it is important to make investments in savings plans that provide enough money to cover costs at significant educational milestones in his life. Even when you are not present, the returns ought to be enough to cover your child’s future needs.

Child plans are insurance and investment programs that assist a person in building a corpus for their children’s future over time (policy term). These plans offer lump sum payments upon maturity that can be utilized to cover your child’s college expenses.

What Are Child Education Plans And How Do They Work?

A child education plan is an insurance strategy that enables you to safeguard your savings and the future of your child. The plan gives you the choice of investing your money and then using it all at once or in installments to pay for your child’s education.

The insurance component is intended to shield the child against unfavorable occurrences like the death of a parent by providing a set annual payout in the event that such an event occurs.

The purpose of the investment component is to accumulate funds through investing in a variety of products in order to meet the child’s financial needs.

You must choose the desired coverage amount. You submit your application to the bank, and they will inform you of the computed premium depending on the selected cover amount.
The next step is to choose between a lump sum payment and ongoing installments.

Many insurers provide child education plans, which can relieve parents of a great deal of concern by taking care of the necessary savings. No parent wants to deny their child the chance to pursue their ambitions by taking advantage of the finest chances that quality education has to offer and making an early investment in a child’s education plan guarantees that they won’t have to.

The Benefits of a Child Plan

The price of a child’s education might be high. The cost of attending college is rising along with the high rate of inflation. It can be quite expensive and challenging to secure funding at the last minute if your child wishes to enroll in a prestigious university. Without having to worry, you can amass enough money to pay for the child’s education.

Children will get the maturity amount at the conclusion of the policy term if a parent passes away thanks to an insurance benefit included in kid plans. Along with this, the child will also receive annual payments starting in the year of the parent’s passing to maintain a normal life, and all premiums after that will be waived.

The child plan is recognized as respectable security for loans. You can use the strategy to raise money in case you require emergency funds.

Types Of Child Education Plans

1. ULIPS for children

A unit-linked life insurance plan is an insurance policy that also acts as an investment. A percentage of your funds is allocated to ensuring the safety of your child, much as the common child education plan. Equity and loan investments make up the remaining amount.

Child ULIPs invest in debt and equity securities in a manner similar to other Unit Linked Insurance Plans (ULIPs). The only distinction between a Child Education Plan ULIP and other ULIPs is the tenure given. A Child Education Plan ULIP pays out when the recipient turns 18 whereas regular ULIPs have policy lengths of 10 to 25 years.

2. Savings programmes for kids

The Child Savings Plan policyholder is allowed to make investments in the plan without engaging in any market trading.

Limitations of A Child Education Plan

1. Diversion of Paid Premium

A Child Education Plan’s premium payment is not entirely invested. This is so that the insured person will receive life insurance, which is funded in part by the premium. The potential payout from Child Education Plans is lowered since the invested amount is less than the actual premium paid and because other fees are also deducted from the premium payments.

2. Limited Investment Options

When choosing a Child ULIP, policyholders have few options for where their money will be invested. The Insurance Company offers only a few funds as investing options. Furthermore, the insurer, not the policyholder, chooses the asset classes in which the investments will be made in Child Endowment Plans. As a result, policyholders have fewer options when deciding how and in which instruments their investments will be made.

3. Very Little Flexibility

Child Education Plans are available with a 5-year withdrawal-free lock-in period. After the lock-in period is over, the policyholder has the choice of giving up the policy or keeping the current arrangement. Furthermore, once the current Child Education Plan is in place, the terms of the policy, including the payment due, life insurance coverage, etc., cannot be changed. This restricts how flexible this insurance coverage can be.

Should You Invest In A Child Education Plan?

The fact that child insurance protects your child in the event of a catastrophic incident is the main benefit of purchasing coverage. A decent insurance policy that matches their financial needs will take care of your children if you are unable to care for them.

In addition to providing protection, kid life insurance acts as a savings account for your child. When your child enters adulthood, you will receive a lump sum payment that you can use to help them with things like marriage, education, and other things.

A child education plan will provide the kid the ability to dream large and think critically. Most plans offer the possibility of paying out as and when the child requires it. This enables the young person to thoroughly consider all of their options before making a bold move.

A child education plan protects a child’s future and gives them the opportunity to plan for it without being constrained by a lack of financial means. With the Assured Education Plan, payout periods can be selected flexibly based on the developmental stages of the kid.


Child plans are investment and insurance programs that help people save money for the future of their kids. When these plans mature, they offer lump sum payments that can be used to pay for your child’s college expenditures. A unit-linked life insurance plan (ULIP) is an insurance policy that also doubles as an investment. A Child Education Plan ULIP pays out when the beneficiary turns 18 years old.

Policyholders have few alternatives for where their money will be invested when selecting a Child ULIP. The asset classes in which investments will be made in child endowment plans will be determined by the insurer, not the policyholder

CA Mukesh Gupta
CA Mukesh Gupta
Mukesh Gupta is the founder and director of Wealthcare. He is Fellow chartered accountant, Certified Financial Planner and Certified Public Financial advisor. He is in financial services industry since 1994. He conducts free money management sessions for corporates and associations on topics related to Personal finance. His previous engagement was with Birla Sunlife group. He regularly writes on topics related to Personal finance and occasionally appear on electronic media.

Leave a Reply

Your email address will not be published. Required fields are marked *

Schedule a Meeting