Life insurance companies are witnessing a steady growth in child insurance plans owing to rising education costs. The insurers have observed that parents are interested in investing in the future of their children education.

"With the ever rising cost of education coupled with increasing uncertainties, it is imperative to save towards the child's key milestones to ensure a smooth sailing," said Pranav Mishra, senior vice-president and head - products and sales development, ICICI Prudential Life.

Today the average cost of an MBA from a premier institute in India costs about Rs 11 lakh. However, owing to inflation, 15 years from now it is estimated to be over Rs 35 lakh, Mishra added.

To accumulate this kitty over a period of 15 years, one has to invest around Rs 8,500 a month regularly, he said.

Child plans usually fall in two categories – unit linked insurance plans (Ulips) and money back. In terms of tenure and withdrawal of funds, Ulip is flexible while money back is fixed.

This plan ensures that money is made available at the most crucial junctures in a child's education, graduation or post-graduation.

"Primarily there are two kinds of child insurance. The first being insurance of the child life and the other for securing his future. The growth is mainly in the second category over the last couple of years," said Debashis Sarkar, senior director and chief marketing officer, Max New York Life Insurance.

Last year, Max New York Life introduced SMART Steps, which has turned out to be extremely popular amongst parents. From October last year till June this year, this product alone contributed to almost 7 per cent of the annualised first year premium (AFYP).

A Delhi-based insurance broker pointed out that investment in education has increased sharply in India and insurance companies have caught on to it very fast.

The average size of the households that save for children education is 5.5 members with an average of 1.5 children going to school. These households spend around 5.2 to 5.5 per cent of their income on education expenses. On an average these households save another 10 to 12 per cent of their income for children.