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Child Plan vs Fixed Deposit – Where Should One Invest?

Aug 01, 2018 | 2 years ago | Read Time: 2 minutes | By iKnowledge Team

Mr. Aakash Vohra, 35 and his wife have a 3-years-old daughter. They are considering various investment options to support her education and financially secure her future in their absence. Aakash’s wife is keen to invest in a traditional fixed deposit, but after doing some research, he thinks a child plan is a more comprehensive and suitable instrument to cover all their needs.

Given the ever-increasing cost of education, not many of us may be able to easily afford quality education for our children or financially help them to get that coveted Ivy League college degree. With this plan, you can build a solid corpus to fund your child’s education thus ensuring them a brighter future or even use it to bear their wedding expenses.

Let’s see if a child plan is the way to go:

Dual benefit of insurance and investment

A child plan provides dual benefits of insurance and investment rolled into one. It gives you the opportunity to accumulate funds while providing protection against unforeseen circumstances.

Lump sum and Fund Value

A child plan provides a lump sum to your child at maturity, along with financial security in the event of a parent’s death during the policy term. On the other hand, at the time of maturity, a fixed deposit provides the lump sum to the proposer too.

Provision of partial withdrawals

A life insurance plan for your child allows you to make partial withdrawals from the yet-to-mature policy. This is a definite advantage as you can withdraw cash to fund for any unexpected needs that may arise or to meet other financial obligations. However, a fixed deposit does not provide this facility.

Premium waiver

Child plans are designed to provide financial support. In the event of the death of a parent during the term of the child plan, the insurer will offer a premium waiver. Thus, the child will receive the lump sum amount as promised without being liable to pay the remaining premium.

Child plan offers liquidity

A child plan offers withdrawals after a stipulated time, making it a liquid instrument—an important feature that is absent in a fixed deposit. You can choose to surrender your policy after four years without any surrender charges and still get the full market value of your investment, net of charges, till date. On the contrary, if you surrender a conventional fixed deposit, you will have to be satisfied with a cut on your investment.

Consider the following points while choosing an appropriate plan:

  • Your risk appetite – High paying equity investments, being volatile, are associated with high risks while debt funds are relatively less risky.
  • Plan rates and charges – Analyse plans of different insurers and compare rates to find a low-cost but valuable plan.
  • Additional benefits – Check if the plan offers additional benefits.
  • Withdrawal conditions – Look for a plan that allows cash withdrawal anytime. This makes accessing your own money easy. 


A child plan is a secure and efficient tool for safeguarding your child’s future. There is a plethora of policy options, ranging from a term of 10-25 years. You can easily evaluate various available products through online aggregator websites and depending upon your desired fund value and coverage needs pick the most suitable one.

Advt. no.: IA/Jul 2018/4270


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