Child Term Rider in Term Insurance: The Complete Guide

What is Child Term Rider?

Children's Term Rider is an optional feature that can be added to a parent's Term Life Insurance policy, Whole Life Insurance policy or other type of insurance policy to secure additional protection for their children. It is a particular kind of add-on explicitly designed for children. It also provides a death benefit to the parents in the regrettable event of the child's unexpected death. The death benefit can cover various expenses, such as funeral costs, medical bills, or other outstanding debts.

Let’s understand child term rider with an example:

Suppose Rahul, a 35-year-old father, buys a life insurance policy from ABC Life Insurance Company with a sum insured of ₹50 lakhs. He also chooses the child term rider to cover his two children, Ria, who is eight, and Arjun, who is five.

ABC Life Insurance Company provides a child term rider for a sum insured of ₹5 lakhs per child. Rahul covers both his children under this rider by paying an extra premium of ₹2,000 per year.

Ria passed away a few years later, when she was 12 years old, due to a serious accident. In this unfortunate case, the child term rider takes effect. ABC Life Insurance Company would pay Rahul the sum insured of ₹5 lakhs under the child term rider.

This sum can assist Rahul in covering the costs of Ria's medical care, burial charges, and other related expenditures at this difficult time.

Arjun's child term rider coverage will continue until he reaches the age restriction indicated in the policy, typically 25 years old, or until Rahul's main life insurance policy expires, whichever comes first.

Without the child term rider, Rahul's life insurance policy would have offered no cash assistance for his children's sad circumstances. The child term rider provides his family with financial support during a difficult time.

How Does Child Term Rider Work?

In this section, we will discuss how Children’s Term Rider works, including coverage options, eligibility criteria, benefits and features, and limitations and exclusions.

Coverage options

The CTR provides a death benefit in the event of the child's demise when the policy is active. The coverage typically continues until the child reaches the age of 25. The life insurance coverage amount can range from a few thousand rupees to tens of thousands of rupees, depending on the policyholder's needs and budget.

The coverage options may also vary depending on the insurance company and policy terms. Some policies may offer coverage for accidental death or permanent disability, while others may only cover natural death. It is important to carefully review the coverage options before purchasing a CTR to ensure that it meets the specific needs and requirements of the family.

Eligibility criteria

In India, the eligibility criteria for CTR may vary depending on the insurance company and the policy terms. However, some common eligibility criteria for Children's Term Rider in India include the following.

The child must be the biological or legally adopted child of the primary policyholder.

The child must be within a certain age range, as specified in the applicable policy wordings.

The primary policyholder must have an existing life insurance policy with the same insurance company before adding the Children's Term Rider.

The policyholder must pay the required premium for the CTR as per the policy terms and conditions.

The policyholder may be required to provide medical information about the child to the insurance company.

It is important to note that the specific eligibility criteria may differ between insurance companies and policies. It is advisable to carefully read the policy terms and conditions and consult with the insurance company to understand the eligibility criteria for CTR.

Benefits and features

CTR provides a death benefit in the event of the insured child's death. The death benefit can cover the expenses associated with the child's funeral, medical bills, or any outstanding debts. It may also provide an option to convert the policy to permanent life insurance when the child reaches a certain age.

Limitations and exclusions

When considering purchasing Children’s Term Rider in India, it is important to keep in mind that the policy may have certain limitations and exclusions. Some of the common limitations and exclusions include pre-existing medical conditions, accidental death, and suicide.

Pre-existing medical conditions refer to the child's health conditions before purchasing the policy. Insurance companies may exclude coverage for pre-existing conditions or charge higher premiums if they are included. It is important to disclose any pre-existing conditions accurately to the insurance company at the time of application to avoid any issues later.

Accidental death is another limitation that may be included in Children’s Term Rider policies. Some insurance companies may not cover accidental death or may have specific conditions under which accidental death is covered.

In India, suicide is often excluded from coverage under Children’s Term Rider policies. This means that if the child dies by suicide, the policy may not provide any benefits to the family. The suicide exclusion period varies by insurance company, but it is usually two years from the date of policy purchase.

How to Buy Child Term Rider?

Here are the typical steps to buy a Child Term Rider:

When applying for or reviewing your life insurance policy, inform the insurance agent or company that you want to add a Child Term Rider.

You'll need to provide details about each child you want to cover, including their names, birthdates, and other required information.
Decide on the coverage amount you want for each child.
There will be an additional premium charge for the Child Term Rider, usually a small amount added to your primary policy's premium.
Sign any necessary forms and complete the application process as the insurance company requires.
Carefully review the terms, conditions, and features of the Child Term Rider, including the conversion options and any guaranteed insurability provisions.

Comparison of Children’s Term Rider With Other Insurance Options

Understanding the different options and features is essential to make an informed decision based on your needs and financial goals. Here’s an overview of options available other than CTR in Term Insurance.

Whole Life Insurance policy for children

Whole Life Insurance for children is a permanent life insurance policy that provides coverage for the lifetime of the child. It also includes a savings component that builds cash value over time, which can be accessed in the future. Unlike CTR, Whole Life Insurance for children is not restricted to a specific age limit, and the coverage lasts for the lifetime of the child. One of the significant advantages of Whole Life Insurance is that it provides a death benefit and savings component. However, the premiums are usually higher than those for Term Insurance, including CTR.

Standalone Term Insurance

Standalone Term Insurance is a conventional life insurance plan that offers a predetermined coverage duration, usually lasting from 5 to 30 years. It guarantees a one-time payment in the event of the policyholder's demise within the term of the policy.

Savings plans

Savings plans are life insurance policies providing insurance coverage and savings components. The premiums paid towards the policy are divided into two parts:

A portion of the life insurance coverage, and

The remaining portion is for investment in various financial instruments, such as stocks, bonds, or mutual funds. The savings component builds over time, providing a lump sum payment at maturity or as per the policy terms.

Savings plans can be a good option for parents who want to save for their children's future while providing life insurance coverage. However, the returns on the investment component may vary depending on the market performance, and the policy may have a lock-in period, which can limit the liquidity of the investment.

Table of Comparison Between Various Insurance Plans and Children’s Term Rider

	CHILDREN'S TERM RIDER	WHOLE LIFE INSURANCE FOR CHILDREN	STANDALONE TERM INSURANCE	SAVINGS PLANS
Coverage	Provides coverage for children up to a certain age	Provides lifetime coverage for the child	Provides coverage for a specified term	Provides returns on investment
Premiums	Affordable premiums	Higher premiums compared to Children's Term Rider	Premiums are generally lower than Whole Life Insurance	Premiums depend on the investment plan chosen
Flexibility	Flexible coverage options	Less flexible compared to Children's Term Rider	Provides coverage for a specific term	Flexibility depends on the plan chosen
Guaranteed insurability	Guaranteed insurability for the child	Guaranteed insurability for the child	No guaranteed insurability	No guaranteed insurability
Tax benefits	Tax benefits available	Tax benefits available	Tax benefits available	Tax benefits available
Coverage period	Coverage period is limited to a certain age	Provides lifetime coverage for the child	Coverage period is limited to a specific term	Coverage period depends on the investment plan chosen
Benefits on maturity	No maturity benefit	Usually, maturity benefit paid on the child's 18th, 21st or 25th birthday	No maturity benefit	Maturity benefit paid at the end of the investment plan

Choosing the Right Child Term Rider in India

You must keep these pointers in mind while choosing the right child term rider plan in India

Assess Your Needs

Consider your family's financial condition and the amount of protection you desire for your kid in the case of your untimely death. Consider your child's future educational costs, healthcare demands, and other financial commitments.

Research Insurance Providers

Investigate numerous insurance companies in India that give Child Term Riders as part of their life insurance policy. Look for insurers with a solid reputation for dependability, customer service, and financial stability.

Compare Rider Features

Compare the features and advantages of Child Term Riders offered by various insurers. Look for riders that offer comprehensive coverage, such as a lump sum payout, to safeguard your child's financial security in your absence.

Review Policy Terms and Conditions

Read each Child Term Rider's terms and conditions carefully to understand the coverage limits, exclusions, waiting periods, and claim procedures. Pay attention to elements including the child's age eligibility, coverage amount, and premium payment conditions.

Consider Premium Costs

Compare the premium expenses for Child Term Riders from various insurers. While cost is vital, choose riders that provide appropriate coverage at a fair premium rate.

Factors Affecting Child Term Rider Premium

Several factors influence the premium of a Child Term Rider, which provides financial protection for a child in the event of the insured parent's death. These factors include:

Parent's Age and Health

The age and health of the covered parent directly influence the premium. Younger and healthier parents often pay cheaper rates since they are regarded as less likely to die prematurely.

Coverage Amount

The quantity of coverage selected for the Child Term Rider influences the premium. Higher coverage amounts result in higher rates as the insurer assumes more financial risk.

Child's Age

The child's age when he or she purchases the rider might impact the premium. Younger children may have cheaper rates due to the longer projected period of coverage.

Term Length

The length of coverage chosen for the rider influences the premium. Longer periods typically result in higher rates due to the prolonged time of coverage offered.

Wrapping it Up

As a parent, adding a child rider to your life insurance policy makes sense. However, it's crucial that you thoroughly research the benefits, limitations, premiums, and the possibility of a conversion rider in the future.

NOTE: A child plan and a child term rider typically involve life insurance coverage for children, but they are not entirely the same.

Child Plan: A child plan is a standalone life insurance policy designed for children. These plans often offer a combination of insurance coverage and investment components.

Child Term Rider (CTR): A child term rider is an add-on that can be attached to a parent's life insurance policy.

Frequently Asked Questions

Below are some of the frequently asked questions on Children’s Term Rider in Term Insurance

What happens to the policy if the premium is not paid on time?

If the premium is not paid on time, the policy will lapse. Some insurance companies may offer a grace period to make the payment, but if the policy is not revived within the grace period, the coverage will end.

Can Children's Term Rider be added to any life insurance policy?

No, not all life insurance policies allow Children's Term Rider to be added. It is important to check with the insurance company and read the policy terms and conditions.

Is it necessary for the child to undergo a medical check-up for a Children's Term Rider?

It depends on the coverage amount and the insurance company's underwriting policy. In some cases, a medical check-up may be required, while in others, it may not be necessary.

What happens to coverage under a children's term rider?

Until the child reaches the "age of maturity," typically 25, but may differ across carriers, most riders will continue to provide coverage. When the child reaches a certain age of maturity, some plans let you convert part and all of the term insurance into permanent coverage. This is regardless of the child's health.

What age is a child rider?

To be eligible for this add-on, your child must be between the ages of 15 days and 18 years. Either their 25th birthday or your 65th birthday, whichever comes first, will be covered.

Children’s Term Rider in Term Insurance

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