Everybody is talking about Child Insurance Plans….
My Friends have taken it too….
People Say they are great Investment Options…..
Are these very familiar lines you here most often. When it comes to our children , there safety, there education etc. we become extra cautious. The result, there is someone with a ready solution to your problem and “Child Insurance Plans“ is one such product on offer.
But before jumping into buying “Child Insurance Plans” just because your friends bought it or someone suggested you to buy, please understand the concept of “Child Plans” and what purpose they solve. Don’t just buy Plans for heck of it and because it is advertised on TV and Print.
It’s difficult to get a better marketing ploy where the idea is to strike an emotional chord with parents to do something for their kids.We have people asking “Can you suggest some good Children’s Insurance Plans.” The first question we ask is , “What objectives are you trying to accomplish?” Then came the response, “I heard that these are great investments. My Uncle has been touting the 40% return that this policy has given in the last 3 years”.
Most parents today would probably think like my dear friend when it comes to investing for their children. This is one of the biggest mistakes that one could make. Just because a product carries the label “Child’s Plan” does not make it relevant for children or the best option for them. Who says PPF ,diversified equity mutual funds,fixed income bonds etc. cannot be utilized for achieving children’s goals.
The key point in investing for children should be to build a corpus for them.Now when it comes to the childs future your need funds for their school education, college expenses, higher education and marriage expenses.This corpus can also be built through PPF, EPF, mutual funds, stocks, and real estate.
Apart from buliding a corpus for your child's future , your need to provide for some security in case something happens to you. Liquidity become an issure when you have a build a corpus through Real Estate, PPF or a Bond, and therefor you should also have enough insurance cover.
What are children’s insurance plans?
Children’s insurance plans are investment oriented insurance plans. For most plans, the life of the parent is covered and, in case of the unfortunate death of the parent, the child (or the appointee in case of a minor) would get the proceeds of the policy.
Almost all life insurance companies are offering "Child Insurance Plans" and the features and charges differ from company to company.The advantage of these policies is the security and the liquidity which the child get's in an unfortunate event.
But, the only word of caution is that please check the all the charges,fees and expenses before buying. Please do not buy these policies for the greed of making quick money. If you are serious about your chuld's future, plan it well try to figure out how much money you require at different life stages of your child and also how much the child will need to complete his education in case you are not there.
What should you choose ?
When it comes to Pure investments, prefer diversified equity mutual funds over ULIPs.
Remember that insurance is important and make sure that you have sufficient cover to take care of your child’s future.You can also opt for a pure term insurance plan and invest in mutual fund.
You and your child will both do well by keeping insurance and investment decisions separate. Cover risk through insurance products and look to invest in mutual funds or even your PPF/ EPF etc.
