Walk into a bank branch or meet a traditional insurance agent, and one of the first products they'll recommend for new parents is a child insurance plan. These plans are widely sold and generate significant commissions. Whether they're the best financial tool for protecting your child's future is a more complicated question.
A typical child insurance plan works like this: the parent pays premiums for 15–20 years. The policy provides life cover on the child, and at maturity — typically when the child turns 18 or 21 — a lump sum is paid for education or marriage. Some plans include a waiver of premium feature if the parent dies.
The case for a child plan: If the waiver of premium feature is robust — meaning the policy continues and pays out at maturity even if the parent dies, with no further premiums required — then it provides a guaranteed education fund regardless of what happens to the parent. That's genuinely valuable.
The case for a term plan instead: A term plan on the earning parent, sized to include the child's estimated education costs, provides a much larger pool of capital on death. The nominee (surviving spouse) can invest that capital and generate the education fund — while having significantly more flexibility in how it's used. The term plan premium is also much lower than a child plan for equivalent protection.
The honest answer: for most families, a well-sized term plan on the primary earner plus a separate, non-insurance savings vehicle (PPF, ULIP, or savings plan) for the child's education is more efficient than a single child plan. But if simplicity and a guaranteed, defined education payout are priorities, child plans with strong waiver-of-premium features have their place.