Definition
Child Plan
A child plan is a life insurance policy designed to build a corpus for a child's education or marriage, with features ensuring continuity if the parent dies.
Typically taken on the parent's life with the child as beneficiary, a child plan pays staggered or lump-sum benefits aligned with education milestones. A built-in or rider waiver of premium ensures that if the proposing parent dies, the insurer funds the remaining premiums so the planned payouts still occur.
Child plans come in traditional (endowment-style) and ULIP variants. Because returns from bundled plans are often modest, many advisers suggest a combination of adequate term cover on the parent plus dedicated investments, but the guaranteed continuity feature is the child plan's distinctive appeal.
Related terms
- Endowment PlanAn endowment plan is a life insurance policy that combines a death benefit with a lump-sum savings payout at maturity if the policyholder survives the term.
- Waiver of PremiumWaiver of premium is a rider under which the insurer pays future premiums on the policyholder's behalf if a defined event such as disability or critical illness occurs.
- Unit Linked Insurance PlanA Unit Linked Insurance Plan (ULIP) is a life insurance product that combines life cover with investment in market-linked funds chosen by the policyholder.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.