Single-Premium vs Regular-Premium Child Plans: Which is the Best?


5 min read

When it comes to securing our child’s future, there can be no amount of money that is too much. However, in terms of benefits, which child plan would be better for our kids – a one-time premium one or the one where we pay premiums regularly? Let’s find out.

Children have dreams and as parents, it’s our role to help guide them towards achieving those dreams. However, unlike fairy tales, these dreams come with a price tag attached. Sometimes parents may need to plan better in terms of finances to help realize their child’s aspirations. This is where a child plan can help. Here we learn about what a child plan is and whether it would be better to invest in a single-premium or regular-premium one.

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What are Child Plans in Insurance?

A child plan is essentially the key to your child’s secure and worry-free future. As children grow older, they aspire to reach heights in a particular profession or receive education from a reputed university, whether in India or abroad. With rising costs, these dreams too start seeming expensive and sometimes even unaffordable to the parents. This is when buying a child plan comes into use.

Child plans are exclusively designed to help young minds dream high and reach higher in life without worrying over the financial aspect of it. The insurance company that you buy the child plan from would compensate for all the expenses incurred on the child’s education under the child plan.

Besides this, child plans also help cover other monetary losses for the child in life in case of any unfortunate event, such as accident or death of any one of the parents. In such distressed times, child plans provide financial security to the child when it’s most needed by way of monetary benefit. The child plan covers maturity and death benefit for the child in case of accidental death or permanent disability of the parent.

What are Single-Premium Child Investment Plans??

Now we know that investing in a child plan for a bright and secure future of your child is absolutely necessary. Let us now look at the two different types of child plans available in insurance:

  1. Single-premium child plan
  2. Regular-premium child plan

Single-premium child investment plans require investment in the form of single premium child plan. In other words, the total premium payable towards the child plan can be paid all at once in a lump sum to the insured by the policyholder.

What is a Regular-Premium Child Insurance Plan?

Under these types of child plans, premium is payable at regular intervals throughout the term of the policy. These time intervals are specified under the plan at the time of policy purchase and the duration or term of the plan is also clearly made known to the buyer. The policyholder then pays regular premium towards the maintenance of the plan; hence, the name regular-premium plan.

Single-Premium or Regular-Premium Child Plan: What are the Differences?

Choices can sometimes be confusing. Now when we have two options with regard to a child saving plan for investment, it’s easy to get confused and difficult to make a choice. To make things simpler for you, we present here the key differences between the two types of child plans – single and regular premium – to help you make an informed decision.

Parameters for Consideration Single-Premium Child Plan Regular-Premium Child Plan
Affordable for the common man Since the entire premium is paid all at once, the plan can sometimes get unaffordable. The premium amount is evenly spread out across the term of the plan and can therefore be easily afforded by the masses.
Tax deductions Tax deductions permissible up to Rs. 1,50,000 under Section 80C of the ITA, 1961. In case premium payable is over the permissible limit, it would not enjoy tax deduction. Tax deductions allowed for premium every single year under Section 80C of the ITA, thereby resulting in tax savings.
Convenience of payment Since the premium is paid just once during the entire policy term, it’s convenient for the policyholder. No need to remember dates to make future payments too. You would need to remember the exact date on which the premium needs to be paid every year so that you don’t miss it.
Add-on riders No future add-on rider benefits available from the insurer after one-time premium payment. Current and future add-on benefits available to the insured during the term of the policy.
Risk involved The one-time lump sum paid towards the policy gets locked for the entire policy term, thereby denying benefits resulting from market value changes in premium amount. With fluctuations in the market, the policyholder is entitled to receive benefits with changing value in money invested.

What is Rupee Cost Averaging?

When there are changes in the capital market, the value of money invested also changes. In other words, the shares and units purchased by the investor increase or decrease keeping in line with the market fluctuations. This means that with a fall in the market value of the shares/units, the investor tends to enjoy a larger number of shares/units, and vice versa.

With a rise in the market value of the shares, the investor would be able to receive a lesser number of units. However, since the market is on the rise, the value of each share/unit for the investor would increase. This situation is known as rupee cost averaging and impacts the decision to buy a single or regular premium child investment plan.

Read More: 5 Best Policy and Investment Plans for Girl Child

Wrapping it Up

As seen in the blog, the decision to buy a single-premium or regular-premium child plan is based on a number of parameters, as detailed in the table. Based on these factors, it is wise to make an informed choice with regard to the best child plan to invest in for your child’s future. PayBima offers a host of choices for child savings and insurance plans in India. You can visit the website or speak to the insurer to determine the amount of premium payable for both single and regular premium child plans.

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Nov 08, 2022
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PayBima Team
PayBima is an Indian insurance aggregator on a mission to make insurance simple for people. PayBima is the Digital arm of the already established and trusted Mahindra Insurance Brokers Ltd., a reputed name in the insurance broking industry with 17 years of experience. PayBima promises you the easy-to-access online platform to buy insurance policies, and also extend their unrelented assistance with all your policy related queries and services.

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