“Waiver of Premium Rider in a Child Plan: A Complete Guide for Parents”

While planning your child’s future, parents can look for some financial tools which will provide them with growth and financial protection. To accomplish long-term financial objectives, such as a child’s higher education, marriage, etc., parents should compare the Best Saving Schemes available in the market. Additionally, choose a plan with a waiver of premium rider, which ensures the financial protection of the child even in the parents’ absence.

What is a Child Insurance Plan?

A Child Insurance Plan helps secure the financial future of your child & meet rising educational expenses. It includes allocation of a part of the premium towards investments, which can be used to build a corpus for their education, marriage, etc. &, and the remaining towards insurance, which ensures the financial security of a child in case of the sudden demise of the parent. 

Provided are the reasons to buy a child insurance plan:

• In the case of a parent’s sudden demise, the death benefits are received by their beneficiaries, letting them maintain their livelihood by providing them with financial security.
• As ULIPs are market-linked, this helps you build a large corpus, helping you meet your child’s future costs. The traditional child educational plans offer bonuses & assured returns, which also help increase corpus funds.
• As parents, you can use these plans as collateral against a loan to meet your child’s future costs. 
• The premium waiver benefit provides a child with an option to continue the plan even in the case of their parents’ demise. This means an insurance company will continue paying the premium amount if the policyholder dies on their behalf, helping to create corpus funds for the child.
• The market-linked returns earned help you create corpus funds fulfilling your child’s requirements.
• This plan offers life coverage, besides savings corpus funds for your child.
• The premium paid towards this plan is eligible for a tax deduction u/s 80C of the Income Tax Act, 1961. Additionally, the maturity or death benefits received are also exempt from tax u/s 10(10D) of the Income Tax Act, 1961.

What is the Waiver of Premium Benefit?

A child insurance plan has a salient feature known as “waiver of premium”, which ensures continuation of the plan even in case the parent is not able to make future premium payments in certain unfortunate events, such as critical illness, death or total permanent disability. This means waiver of all future premiums, while all benefits remain intact.

Some of the features of waiver of premium benefits are:

• The entire remaining premium amount gets waived off.
• Many child-based ULIPs come with an inbuilt feature of waiver of premium advantage.
• Most of the endowment plans offer this benefit as an additional rider at an added cost.
• Additionally, this benefit is available when a policyholder is suffering from any disability, critical illness, or death.

How Does the Waiver of Premium Benefit Work?

Child plans offer the dual benefit of insurance and investment, hence including allocation of premium towards each, i.e. insurance and market-linked investments. Children can get market-linked returns on the funds accumulated, depending on the performance of the market. The insurance part will help your child with the compensation amount in case of an unfortunate event, such as death.

Under normal insurance plans, the policy ceases once the death benefit is paid off. But under child investment plans, the investment factor remains accruing till the plan matures, but the premium has to be paid by the insurer due to the waiver of the premium benefit. 

Eligibility Criteria 

Provided are the eligibility parameters to be met to avail the waiver of the premium benefit:

• The minimum age to avail the benefit of waiver of premium is 18 years.
• The maximum age to avail the benefit of waiver of premium is 18 years.
• The maximum age of maturity is 70 years.

Exclusions under Waiver of Premium Benefit Rider

Provided is the list of disability which do not offer to avail an additional waiver of premium rider:

• Suicide
• Self-inflicted injury –
• Any congenital infection
• HIV
• Inclusion in war, riots, invasion or commotion, strikes, hostilities, etc.
• Nuclear contamination
• Involvement in some hazardous acts, such as hunting, martial arts, bungee-jumping, and diving.
• Involvement in any criminal activity

Benefits of Waiver of Premium Rider

Parents looking for the Best Child Investment Plan should be clear on the benefits of this waiver of premium feature, ensuring implementation of a continuous strategic child plan, altogether with financial security in case of certain unfortunate events.

• Protection Against Critical Illnesses

This feature allows continuation of the policy in case the policyholder dies due to any critical illness anytime during the policy tenure. Critical illnesses include heart attack, kidney failure, vascular diseases, cancer, etc.

• Protection Against Disability

Under the child education plan, if the parent gets disabled or dies due to an unforeseen event, it will become difficult for the child to continue the policy. Hence, under such circumstances, availing this rider can rescue and waive off all future premiums.

• Cost-Effective Premium

Some of the insurance companies offer this rider as an inclusion in the plan, but some do not. In case this feature is not an in-built add-on to the plan, parents can add this feature to enhance the plan at an added cost.

• Flexible Rider Option

Most of the insurance companies offer an in-built feature of waiver of premium benefit. Many of them offer flexibility to either add or remove the same as per the convenience and requirement of the policyholder. 

• Tax Benefit

The premium paid towards the child plan is eligible for tax deductions u/s 80C of the Income Tax Act, 1961. Additionally, the benefits received from this waiver of premium rider are also exempt from tax u/s 10(10D) of the Income Tax Act, 1961.

Conclusion

Child plans are considered vital in securing the financial future of a child until they attain maturity. With available riders, such as waiver of premium, a policyholder gets an additional protection shield by eradicating the need to make future payments towards the premium amounts in the absence of the policyholder. The benefits of the policy remain intact for the child until the policy matures. Hence, it is advised to add this feature in case it is not in-built to enhance the plan at some added cost, further providing financial security to the children.