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Child Money Back Plan

Education is getting costlier year after year, and so are the requirements of your children. A child money back plan creates a financial safety cushion for your family and safeguards the different milestones of your child. Regular payouts received can provide for your child’s requirements at various stages and the maturity benefit supports the higher education plans you have for your child. Regular payouts also open doors for additional income options. Deploying these funds in lucrative side hustle ideas can boost your earnings. ...Read More

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Child Money Back Plan

What is a Child Money Back Plan?

Child Money Back Plan
January 09, 2025

Table of Content

 

What is a Child Money Back Plan?

A Child Money Back plan is a regular life insurance plan with a few added benefits. The plan has both insurance and investment components. The primary goal is to provide regular payouts during the policy term to manage your child’s various milestones.

The regular payouts can also be invested in freelance income opportunities or financial growth ideas to create an alternative income stream. Invest in a Children Money Back policy to benefit from insurance and investment.

How Does a Child Money Back Policy Work?

A child money-back plan combines life cover with an investment plan. The insurance company invests the premiums collected in funds it manages. The policy attains a cash value with the investment returns. A regular payout is given at this cash value.

Policyholders can choose the tenure depending on the goals set for their children. The maximum tenure available, might differ, depending upon your policy, with a premium payment period as well.

The sum assured might be fixed of the annual premium. With flexible premium payment options, it can be paid either monthly or annually.

If, the insurance company pays the policyholder 15% of the sum assured on the 5th, 9th, and 13th year if no claims are made during the policy term, then The residual sum assured, along with accrued bonuses, is paid at the end of the 16th year, again this might differ according to your plan purchased..

Passive income ideas like investing the regular payouts in mutual funds, stocks, fixed deposits, etc., create multiple income sources.  

The lump sum received as a maturity benefit can be a corpus to fulfil your child’s long-term financial goals. You can also employ income boosting strategies and invest the funds to create parallel income.

In case of an eventuality during the policy term, the beneficiaries will receive the sum assured along with accrued bonuses as death benefit, which amounts to 105% of the total premiums paid provided the policy is active.

Please Note: The Criteria for all the polices might be different. Refer to the policy Brochures before making your decisions.

Features of a Child Money-Back Policy

Investing in a child money back plan is the best way to boost your earnings and protect your child’s future goals. The noteworthy features child insurance plan are:

  • Guaranteed Payouts

The guaranteed payouts at frequent intervals during the policy term make the child money back plan a safe investment option. The payouts help in meeting financial requirements arising during the policy term. You can explore extra income opportunities and diversify income streams with the available disposable funds. The periodical payouts will be a percentage of the sum assured.

  • Insurance Coverage

The plan offers life cover, which serves as a financial safety net for your family. The sum assured is set at 10 times the yearly premium paid. In case the policyholder does not survive the policy term, the nominees receive a death benefit at 105% of the total premium paid. The payout can be either monthly or in a lump sum and depends on the option chosen on the date of policy purchase.

Benefits of Child Money-Back Plans

The benefits of child money-back plans abound, and they are:

  • Guaranteed Payouts

The Child Future Plan provides periodic payouts and ensures funds availability for every milestone of the child. Individuals who understand ways to build wealth can utilise these funds for financial growth ideas and improve their financial health.

  • Tax Benefits

The premiums paid towards the child money back plan qualify for deduction from the taxable income under Section 80C1 of the IT Act. Also, the maturity benefits and death benefits are tax-free under Section 10(10D)1. The reduction in tax liability enhances disposable income. The available funds can be allocated to short-term online investment options like trading to earn money online.

  • Parent’s Life Cover

The parents' life coverage in the Children Money Back Policy secures the financial future of the child. If the parent dies during the policy term, the nominee receives a death benefit either in a lump sum or as monthly payouts. It will take care of the financial requirements of the child as well as other specific needs of the family.

  • Bonus Additions

Select child money-back plans that offer bonuses. These are payouts in addition to regular payouts that boost the returns on investment by enhancing the policy value. Prudent investment of this additional income helps create ways to earn more money.

  • Flexible Payments

The flexible payment option in the plan eases financial planning. You can pay the premium either monthly, quarterly, half-yearly, or yearly. This benefits businessmen whose income patterns are not regular.

  • Rider Options

You can enhance the coverage with riders like accidental death riders, critical illness riders, waiver of premium riders, etc. You can add the riders to the base plan for an additional premium to customise the plan to suit specific needs.

How to Choose the Best Money-Back Policy?

To select the best Child Money Back plan to serve the purpose of securing your family’s future, you should consider the following factors:

  • Financial Needs

Consider the following aspects to assess the tenure and sum assured:

- Child’s age.

- The annual investment you can afford.

- The returns you anticipate on the maturity of the plan.

- When do you need the regular payouts?

  • Plan to Align With Your Needs

Focus on the following points to ensure that the child savings plan aligns with your needs:

- The tenure should be planned in such a way that the payouts should commence the same year you need the funds or earlier.

- The sum assured should be assessed in such a way that the maturity benefit should be higher than your requirement to beat inflation.

- Choose an insurance provider whose bonus track record is good.

  • Insurance Provider’s Reputation

The reputation of the service provider is pivotal to avoiding claim settlement complications. Ensure the following while selecting the insurer.

- A good Death claim settlement ratio, indicates the reliability of the insurer.

- Check the leverage ratio of the provider, as it is the yardstick to measure their capability to honour regular payout promises.

- A good bonus track record is an added advantage as it will enhance the policy value and boost the returns.

- Review customer testimonials about the claim settlement procedure and how complicated or easy it is.

How Child Money Back Plans Can Help You Secure Your Child’s Education Fund

The education expenses of children are spread over a few years. A Child Money Back plan provides automatic payouts to your child’s needs at different stages. For a lump sum corpus in addition to the payouts to fund your child’s higher education, employ the following strategy:

  • Combine the child money-back plan with a Unit Linked Insurance Plan. The periodical payouts from the money-back plan facilitate cash flow throughout the child’s life, and the lump sum corpus from ULIP will be available for higher education. Also, with the guaranteed payout from the money-back plan, you can start a side business to boost the education fund.
  • You can spread the investment over multiple money-back plans with a gap of 1 year between each plan. You will have continuous cash flow for the next 11 years starting from the 5th year of the 1st plan. If you are aware of how to generate more revenue, the payouts can be a source of increasing financial income.  

Conclusion

Child Money Back plan is an avenue for parents to secure their child’s financial future. It provides periodical payouts for the child’s milestones. The lump sum maturity amount can fund the higher education of the child. Apart from this, the family receives a death benefit in a lump sum or as a monthly payout if the insured dies within the policy term, which secures the child’s future. Further, the bonus additions enhance the policy value.

If your child’s financial security and investment income growth is what you are looking for in a child’s plan, the Child Money Back policy is the one you should invest in.

FAQs On child money back plan

Q. What is a children's money back plan?

A Children’s Money Back plan is a conventional insurance plan with periodical payouts after a few years. The payouts generally are on the 5th, 9th, and 13th year. The life cover serves as a financial safety net for your family in case of your early demise.

Q. How does a Child Money Back Plan help secure my child’s future?

The child money-back plan offers a death benefit to the family in case of the early demise of the insured. This secures the financial future of your child.

Q. Can I add extra coverage to my Child Money Back Plan for education?

You can enhance the coverage of your child's money-back plan by adding riders like accidental death riders, critical illness riders, waiver of premium riders, etc., to the base plan.

Q. Are there any tax benefits with a Child Money Back Plan?

Yes. The premiums paid towards a child money-back plan are eligible for deduction under Section 80C of ITA 19611. The maturity and death benefits are tax exempted under Section 10(10D).

Q. What are the eligibility requirements for a Child Money-Back Plan?

A. A parent or grandparent can invest in the Child Money Back plan on behalf of the child. The policy can be purchased when the child is between 0 to 9 years, depending on the time when the maturity amount is required to fulfil various goals determined for your child.

References:

1. https://www.investopedia.com/personal-finance/10-tips-teach-your-child-save/

2. https://economictimes.indiatimes.com/wealth/insure/which-insurance-does-your-child-need/articleshow/99162469.cms?from=mdr

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Francis Rodrigues Francis Rodrigues

Francis Rodrigues has a decade long experience in the insurance sector, and as SVP, E-Commerce and Digital Marketing, HDFC Life, manages the online sales channel, as well as digital and performance marketing. He has had hands-on experience in setting up sales channels and functional teams from scratch over a career spanning 2 decades.

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Vishal Subharwal Vishal Subharwal

Vishal Subharwal heads the Strategy, Marketing, E-Commerce, Digital Business & Sustainability initiatives at HDFC Life. He is responsible for crafting and ensuring successful implementation of the overall organisation strategy.

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