What is the Deferment Period Under Child Plan

As a parent, you want to provide your kids with the brightest future possible. With growing inflation and changing lifestyles, this chore can be extremely difficult. Future generations find it extremely difficult to balance the various demands of their lifestyles due to the rising cost of inflation.

However, you have the chance to start working now to make things simpler for your kids in the future. You can safeguard your children's future and help them achieve their goals by making good financial decisions and following a plan.

What is a Deferment Period in Children's Policies?

The deferment period is the period from when the child plan is purchased until the child becomes the plan's owner.

In most cases, parents purchase child insurance for their children and pay the premiums as the policy owner. If you are the parent, you become the policy's owner while the child benefits from the plan's protection. When the child reaches a certain age, they become the policy's owner.

What are the Methods by which the Deferment Period under Child Plans Functions?

A child insurance plan operates in two stages of deferment: the first is known as the deferment period, and the second is known as the insurance period.

1. Deferment Period
The deferment period is from the Child Plan beginning to the Ownership Period.

2. Insurance Period
The insurance period is from when the child becomes the policy's owner to when the policy matures. Therefore, the risk protection of the plan starts when the child turns 18 and becomes the policy's owner.

Why should you have a Child Insurance Plan?

A child insurance plan is the best option for parents who wish to safeguard their children's future by setting aside money to support their educational and career aspirations. A child plan is the best savings strategy for parents to build wealth so their children can realise their future aspirations. Here are the top 5 Benefits of Buying a Child Plan:

1. Returns at Maturity
The Child plan enables the nominee to amass a lump sum as a maturity benefit that you can use for the child's numerous needs. The benefits of maturity also include bonuses announced at the time of maturity in addition to the sum assured.

2. Policyholder's Death Benefits
Plans for child insurance include death benefits in the contract. In this scenario, you will receive the guaranteed¹ benefit if the insured or the child who owns the insurance passes away after the deferment term. If the child passes away before the deferment term expires, the policyholder is eligible to collect the full premium amount paid.

3. Tax advantages² for Child plans
The premiums that are paid for child insurance policies are exempted from tax under part 80C of the Earnings tax. The maturity amount obtained may be exempt from income tax under part 10D4.

4. Financial Crisis
In a financial disaster, this plan can be used as emergency money. You can withdraw a portion of your money to meet any emergency necessities.

5. Financial Stability
Savings plans for kids offer a lump sum payment in the form of the claim amount in the event of unexpected circumstances. The goal is still in effect, and the life insurance company is responsible for all future premium payments.

Final Thoughts

The best time to start saving is right now, as there are several advantages to beginning early. The sooner you save, the more you can eventually give your kids. Starting to save for your children as quickly as possible is a wise move. When purchasing a child insurance plan, it's crucial to keep several things in mind, including the deferment term.