Difference Between Term Insurance Policy And Child Life Insurance Policy

So, if you are planning to start a family soon or have just started one, what you need is an insurance plan that will help you secure your family’s financial future. When researching further you will realize that there are several insurance plans available that are designed to fulfill your needs.

Child insurance and term insurance plans are two popular insurance products that help parents secure their child’s future. But many times, people get confused about whether they should invest in a child plan or term plan. So, to safeguard your child’s future, it is crucial to understand what these two plans are and the difference between them. 

What is a Child Insurance Plan?

A child insurance plan acts as an investment and life insurance cover that helps in the well-being of your child’s future over time. There are multiple child plans available in the market. When it comes to child insurance, parents are primary policyholders, and the children are the beneficiaries.

The investment component in the policy helps cover the cost of your child’s higher education or marriage based on the returns earned. Whereas, the life insurance component secures the financial future of your child in the event of your sudden death.

What is a Term Insurance Plan?

Term insurance is a type of life insurance product that primarily secures the financial future of your loved ones in your absence. Here, the policy can come in handy to protect your child’s future as well.

Ideally, term insurance provides a lump sum amount to the beneficiaries of the policy after the policyholder’s death. The amount received can be used by the dependents of the deceased as and when needed. On the other hand, term insurance is also the most affordable life insurance product available in the market.

Unlike a child plan, you can buy the policy at any life stage and customize it as you expand your family. For that, the insurers in India allow you to enhance the scope of the policy with rider benefits. A term insurance plan secures the financial future of your children and other family members as well.

Difference Between Child Plan And Term Plan

The points below will help you understand the difference between child insurance and term insurance.

Type Of Plan
   

Child insurance provides life insurance as well as investment benefits. Term insurance is solely a life insurance product.

Premiums

The premiums for a child plan will depend on the coverage selected and benefits. Also, the insurer continues to invest in the policy after your death. Therefore, the child plan premiums tend to be more compared to term insurance. Term insurance is the most affordable life insurance product available in the market. You can use the term insurance calculator to determine the premiums charged on your chosen coverage and benefits.

Sum Assured

The child policy pays a lump sum benefit to the children after your death. Much like a child plan, term insurance provides a lump sum benefit to the children and beneficiaries after your death.

Payouts

Child plans provide money to the children at specific intervals/milestones. There are no payouts except for the death benefit received by your dependents in term plan.

Partial Withdrawals

You can make partial withdrawals with child insurance. The money obtained can be used to meet any financial obligation. You cannot make partial withdrawals with term insurance. However, with critical illness cover, the insurer will pay a lump sum amount when you are diagnosed with a critical health condition. The money obtained can be used to cover the treatment and hospitalization expenses.

Tax Benefits

The premiums paid towards child insurance can be claimed for tax deduction under Section 80C of the old income tax regime. The payout/benefit received from the policy is tax-free under Section 10(10D) of the Income Tax Act, 1961. The premiums paid toward term insurance can be claimed for tax deduction under Section 80C of the old tax regime. The death benefit received by the beneficiaries is tax-free under Section 10(10D). With critical illness cover on your term plan, you can avail additional deduction under Section 80D of the Income Tax Act, 1961.

Conclusion

Based on the pointers discussed above, you must now know the difference between child insurance and term insurance in general. If you solely want to contribute towards your child’s financial security, investing in a child plan is a wise decision. However, if you're going to safeguard your entire family (spouse, children, and parents) financially in your absence, term insurance is an ideal choice.

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Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.