The rising cost of education and the uncertainties of life have made financial planning for children's future a critical concern for parents. Among the various investment and insurance options available, child insurance plans with a waiver of premium benefit are gaining traction as a comprehensive solution. This feature ensures that the policy continues uninterrupted, even in the event of the policyholder's (typically the parent) death or disability. Here's why every parent should consider it.

What is Waiver of Premium?

The waiver of premium rider is an add-on to a child insurance plan. It ensures that in the event of the policyholder's death or permanent disability, all future premium payments are waived off, but the policy remains active. The insurance company essentially takes over the responsibility of paying the remaining premiums, ensuring that the child receives the promised benefits at maturity.

How It Works

When a parent purchases a child plan with a waiver of premium rider, the following steps typically occur:

1. Policy Purchase: The parent buys a child plan with the premium waiver rider.
2. Covered Event: If the parent dies, suffers total permanent disability, or is diagnosed with a critical illness (depending on the policy terms), the rider is activated.
3. Premiums Waived: The insurer waives all future premiums.
4. Policy Continues: The plan remains active until the end of its term.
5. Maturity Benefit: The child receives the full maturity benefit, ensuring their financial goals are met.

For example, if a parent buys a child plan for ₹10 lakh with a 15-year term and passes away after 5 years, the insurer waives the remaining premiums. At the end of the 15-year term, the child still receives the full ₹10 lakh.

Benefits of Waiver of Premium

• Financial Security: The primary benefit is ensuring the child's financial future is secured even if the parent is no longer able to provide. This is particularly crucial for goals like higher education or marriage expenses.
• Uninterrupted Policy Benefits: The policy continues to accrue benefits as if all premiums were paid, guaranteeing the maturity amount.
• Reduces Financial Burden: In the unfortunate event of a parent's death or disability, the family is relieved of the burden of paying future premiums.
• Tax Benefits: Premiums paid towards child plans are eligible for tax deductions under Section 80C of the Income Tax Act, 1961, up to ₹1.5 lakh per year. Maturity or death benefits are also tax-exempt under Section 10(10D) of the same act, subject to certain conditions.
• Peace of Mind: Knowing that the child's future is financially secure, regardless of unforeseen circumstances, provides significant peace of mind for parents.

Why Consider It?

• Rising Education Costs: The cost of higher education is constantly increasing, making it essential to plan and save adequately. A child insurance plan with a waiver of premium ensures that these educational goals are not derailed by unforeseen events.
• Insurance Coverage: Child plans provide insurance coverage, offering a lump-sum payout upon the parent's demise. The waiver of premium ensures that the policy continues and delivers the promised benefits.
• Disciplined Savings: These plans encourage disciplined savings and investment habits, ensuring a dedicated fund for the child's future.
• Long-Term Needs: Unlike term plans or systematic investment plans (SIPs) that may be disrupted upon the breadwinner's death, child plans with a waiver of premium provide for longer-term needs, ensuring the child's goals are met even in the absence of the parent.

Important Considerations

• Terms and Conditions: It's crucial to carefully review the terms and conditions of the waiver of premium rider, including the specific events covered (e.g., death, disability, critical illness) and any exclusions.
• Cost-Effectiveness: While the waiver of premium adds to the policy's cost, it provides significant benefits. Parents should weigh the additional premium against the financial security and peace of mind it offers.
• Financial Planning: Child insurance plans should be part of a broader financial plan, including adequate term cover and other investments.

In conclusion, the waiver of premium benefit in child insurance plans is a valuable tool for parents seeking to secure their children's financial future. By ensuring the policy continues uninterrupted in the face of life's uncertainties, it offers both financial security and peace of mind.