Showing posts with label child plan. Show all posts
Showing posts with label child plan. Show all posts
Monday, 18 July 2016
Monday, 4 July 2016
Why Is Waiver of Premium Rider Important In Case of A Child Plan?
A child plan is essentially bought with the purpose of
providing adequate financial security to a child during his growing years. It
serves the following two purposes:
Provides financial support at crucial milestones in a child’s
life like higher education, marriage etc. with pre-planned payouts while at the
same time providing maturity benefits too.
Unlike regular life insurance policies where the policy
ceases to exist after the death of the insured, a child plan continues till the
maturity of the policy. It not only provides a death benefit to the child, but
also the maturity policy proceeds of the plan at the time of maturity. This is
where the waiver of premium rider comes in.
What Is
Waiver Of Premium Rider?
This is a benefit provided by the insurers under which the
child need not pay any further premiums in case the insured dies during the
term of the plan. All future premiums are waived off and the insurer pays
remaining premiums towards the policy. In some cases, the insurer also provides
this benefit if the insured is diagnosed with a critical illness.
Why Is The
Waiver of Premium Important?
It helps to keep the policy active till the maturity date so
that the child receives financial benefits as per the policy terms at important
stages of his life
The child is relieved from the liability of arranging funds
to keep the policy active as future premiums are paid by the insurer.
The child gets double financial benefits: first, at the time
of death of the insured in the form of an entire sum assured and secondly, at
the time of maturity of the policy in the form of maturity benefits or fund
value depending on the type of the child plan along with any bonuses, if
applicable.
Important milestones in child’s life like higher education,
marriage etc. will not face any financial hiccups
Elaborating
With a Case Study
Mr. Arora bought a child plan for his 2 year old son for a
sum assured of Rs. 15lakhs for a term of 20 years. Unfortunately, he passes
away after 7 years of buying the policy. At this point, the insurer will pay
the entire Rs. 15lakhs to his son (nominee) as a death benefit and will waive
off, the future premiums pending for 13 years. The policy will remain active,
the premiums will then be paid by the insurer and if it’s a traditional plan,
the child will be paid the maturity benefits at the time of expiry of the plan
and if it’s a unit linked child plan, he will receive the maturity value.
In case the insured outlives the term of the plan, even then
there are maturity benefits depending on the type of plan he has selected. In
short, it is a win-win situation for the child as his upbringing and financial
needs are well-taken care of till he grows up to be an independent man.
Waiver of
Premium as an Inbuilt Benefit or a Rider?
A lot of companies offer this benefit, but some of them make
it a part of basic benefits offered in the plan and some charge a nominal
amount of extra premium to add this feature in a basic child plan.
Child Plans: These are the insurance plans bought by the
parents to safeguard their child’s future in case of the parents’ demise. These
plans also double up as an investment tool that provides financial support to
the child at important stages of his life like at the time of higher education,
marriage etc.
The term plan ends with the insured’s death. The nominee gets
the sum assured as a lump sum payment and the policy ceases to exist. A child
plan carries on even after the death of the insured. The child will get the sum
assured at the time of the death and the policy will continue till the
expiration of the entire term when he will receive the fund value as part of
the maturity benefits.
This feature is only available for the child plans.
Here the insurer waives off the premiums payable on the policy after the death
of the insured. The remaining premiums on the policy are paid by the insurer
till the policy term ends. There is no such benefit offered under term plans,
which cease to exist after the death of the insured. The nominee is only
eligible for death benefits and has to buy a new insurance cover/investment
plans for future coverage.
Source: http://blogs.rediff.com/childplans/2016/07/04/ritikashah11998-19/
Friday, 1 July 2016
Friday, 24 June 2016
5 THINGS TO CONSIDER FOR CHILD PLANNING
Just became a parent? Having sleepless nights taking care of
the newborn and also thinking of your finances ahead? Well that is obvious that
once you become a parent your focus automatically shifts on to addressing the
financial issues unlike in the past. According to Chunk, a business relations
professional, “It was not until I was pregnant that I realized the various
expenses related to childbearing and delivery.” So, what are the expenses she
is talking about? Let’s take a look-
1. Child
Delivery Expenses
Maternity charges are on the rise. Starting from expenses
related to regular health checkups to myriad vaccinations and eventually to the
fees of a modest nursing where one is billed anything between INR 80,000 to a
few lakhs, expenses are humongous. Hospital bills also vary depending on your
room and food preferences, neonatal care and medical expenses. One is lucky if
the child is delivered in good health, otherwise Neonatal Intensive Care Unit
(NICU) charges can get very taxing.
2.
Post-Delivery Expenses
If you are a corporate or government employee, you are lucky
that you’ll still be covered by your salary. But if you are a private firm
employee with limited privileges, then it gets difficult. It even gets worse in
case the new mother doesn’t belong to a well off family and she’s financially
dependent on the spouse. No matter how loving one’s partner is, financial
implications always make one nervous. Post-delivery expenses include essential
stationery, baby food, medicines, immunity care, vaccinations etc.
3.
Traditional Expenses
Childbirth calls for a huge celebration. It is a moment of
joy for friends and relatives to receive a new member in the family. Parents
take hit on their personal finances to ensure the child is received with gold
and other expensive gifts and toys. Parties are thrown, a huge list of guests
are invited. Depending on family traditions there are miscellaneous expenses
associated with the welcoming of the new child who may include offering feast
to the Brahmins and a number of deities.
4. Growing
Up Expenses
As the Best Child
Insurance Plan grows, it is always important to have an emergency fund
because till a certain age, the child is likely to fall sick while trying to
adjust with the environment. An emergency fund secures a lot of uncertainties
and ensures you are able to consult a doctor regarding your child’s health. You
can also consider a family floater for health insurance to take care of
recurring medical expenses. Apart from health issues, when the child is around
2 or 3, getting him or her into a good crèche/school is the biggest investment
that parents contemplate on from the very beginning.
5.
Upbringing for the first child
Are you already nervous after reading the above expenses?
Well, the estimation of finances is not over yet. While you think of all these
expenses for you’re your second child, you cannot ignore the expenses related
to your first child. That’s exactly what
Sasmita, a middle income HR professional had to say, “Although the stress
wasn’t as much when we had planned for the first baby, but as we plan for a
second baby, we can see how difficult it can get to ensure we do not compromise
a bit on the expenses related to our first child”. Indeed, as parents, it is
our responsibility that before we plan for a second child, we ensure that we
aren’t compromising a bit on giving our first born a good upbringing.
Source: http://blogs.rediff.com/childplans/2016/06/24/5-things-to-consider-for-child-planning/
Tuesday, 14 June 2016
Who Else Wants To Know How Child Plans Work
The birth of a child brings immeasurable joy to parents.
However, after the initial euphoria subsides, the future expenses start staring
at you in the face. Add to this the innumerable ads on TV and print media, and
you’re left with only one choice: buy a child plan.
That’s the beginning of your second problem – there are
innumerable child plans out there. How do you know which one suits you the
most?
Ask
yourself these questions.
1. When will your child need the money?
2. How much will you need for the particular goal (marriage,
education)?
3. How much will you be able to save?
4. How much insurance cover do I need?
Understanding Child Insurance Plans
There are basically 3 types of child insurance plans.
Money-Back: This is by
far one of the most popular plans. Under this plan, your child will get
survival benefits at regular intervals. For example, when he turns 18 years, he
would get about 20% of sum assured, and a further 20% at age of 20 and so on.
This plan is useful for those who feel the need for lump sum requirement at
regular intervals and helps you in life stage planning.
Another benefit these plans offer is the premium waiver
benefit, which ensures that in case of death of the parent, then the premiums
are waived off and the policy continues with benefits.
A disadvantage of depending on this alone is that its returns
often fail to match inflation, especially if you are planning to buy it for
your child’s education. Education costs are growing at around 12% whereas
money-backs would give you around 7-9%, leaving you grossly underfunded at the
time of goal. Also, the premiums are steep.
ULIPS: ULIPs are
non-traditional plans wherein returns are market-dependent. If the parent dies
(or, as in the case of some policies, gets diagnosed with some critical
illness), then the child would receive the sum assured in a lump sum. Also,
future premiums are waived off and on maturity, the child would get the fund
value too.
ULIP plans offer variety of funds ranging from conservative
to balanced or aggressive. Under ULIPs, you can change from debt to equity and
vice versa without the worry of taxation, thus enabling you to benefit from
both timing the market and also rebalancing your portfolio.
But, ULIPs levy a variety of charges by way of premium
allocation charges, policy administration charges, mortality charges, fund
management charges, etc. This would affect the returns generated by the
investment in market related instruments and ultimately the corpus that your
child receives. Another negative of ULIP is that in case of an emergency, if
you want to surrender or do partial withdrawal, the charges are high and also
attract tax.
While a long term ULIP (above 15 years) could actually cost
less than a mutual fund, it is less flexible. You just can’t move from one ULIP
to another as in case of mutual funds. If you are putting your entire money in
child ULIP plans and if it underperforms on a consistent basis, you are stuck!
Endowment Policies: Endowment policies are one where lump sum
amount is paid at the time of the maturity along with bonuses. This is very
useful to plan for your child’s big expenses like wedding, higher education,
etc. And, unlike ULIPs, there is a minimum guaranteed amount of payment.
Besides, you may get bonuses too.
Endowment policies too invest in market-backed securities,
but unlike ULIPs, they invest only in debt products and the returns too are not
exactly spectacular. And, if you require higher cover, you will have to pay a
steeper premium. So, an ideal way is to take up an endowment policy as a debt
portion of your overall asset allocation.
Almost all Child Plans
cover the parent and thus, if in an event of an unfortunate untimely death of
the parent, the child’s needs would still be taken care of by way of lump sum
payment on death and also on maturity. But beware of plans that cover the child
and not the parent! It is your child who needs financial security and not you!
Another thing to be noted is that, there are riders like
waiver of premium offered along with child plans to cover the untimely death of
the parent. The policy continues here at the absence of the parent, but the
benefit comes at a high cost as the premium increases due to this rider. And,
the mortality rate charges for a child plan are quite high too.
Source: http://blogs.rediff.com/childplans/2016/06/14/ritikashah11998-18/
Wednesday, 4 May 2016
How To Plan For Your Child’s Future With Mutual Funds?
With cost of higher education shooting up, fixed income
return options are unlikely to help you save for your child’s future. You need
to aim for equity returns.
People usually save either for retirement or with a specific
goal in mind. One of the goals is children’s future like education or marriage,
while other goals could be to buy a house, car amongst others. This article
focuses on the children’s future as a goal.
There are 3 key variables that you broadly need to keep in
mind when planning for children:
The amount you may need for the child’s education (and
marriage)
Years left to the event
Return expectation to build in
As you can see, there is a vast difference in the monthly
amount you need to save, with difference combination of years left, and returns
you will earn.
So our first advice to you is to start early. If you start
investing for a child when you marry, you may have as many as 20 years ahead of
you. But if you start when the child is say 5 or 8 years old, then you could be
left with barely 10-12 years. The more the years you have, the less you need to
set aside on a monthly basis.
The other critical part is the return your savings are
generating. It is common to find parents investing in fixed deposits or Public
Provident fund(PPF) to sponsor their children’s education or marriage. While as
an investment option it is safer, it also generates paltry returns of 8-9% per
annum. While interest on PPF is tax-free, that on fixed deposit is taxable,
which pulls down the post-tax returns even further. Given the rate at which
cost of higher education is shooting up in the country, debt definitely seems
an investment option not worth considering.
As against this, if you try to aim for equity investments,
your returns could be between 12-14% per annum, which is the bare minimum
returns equity markets show over long periods.
As your approach the last 2-3 years of the child’s
educational needs, you can choose to shift the portfolio towards debt, to
eliminate any volatility risk – though this would not be a major consideration
as the requirement for funds would be spread over a 3-4 year period.
Many parents prefer to open an investing account in the name
of the child, in order to isolate the account, accommodate for gifts in the
name of the child, and for tax reasons. If you plan to save in the name of the Child Plans. The best
investment is in an investment in education".
Source: http://bestsavingsplan.tumblr.com/post/143835066329/how-to-plan-for-your-childs-future-with-mutual
Monday, 14 March 2016
Tuesday, 8 March 2016
Thursday, 25 February 2016
Wednesday, 24 February 2016
Financial steps to take before you have a child
There’s no greater happiness in the world than the arrival of
a new baby. From the moment the child is born, it is difficult for new parents
to take their eyes off their little bundle of joy. But a child is also one of
the biggest responsibilities the world has ever known. Financial planning for
your child is a very important part of this responsibility. This financial
planning is built upon certain crucial steps that you need to take before you
have a child. We have therefore enlisted 8 financial steps that you must take
before you have a child.
1) Get health insurance
There is nothing more important than the health of your new
born, and to look after that, both the mother and father should be physically
and mentally healthy. Since medical care is quite expensive these days, it is
advisable to buy a health insurance policy before you have a baby (if you
haven’t bought one already). Check which insurance policies cover maternity
benefits. Though no company explicitly offers maternity insurance, certain
companies provide benefits like consultation fee cover. Take a policy that
covers your baby as well.
2) Lifestyle changes
Middle Class and Upper Middle Class couples of today are used
to living a more than modest lifestyle; but a baby’s entry into their lives
changes a lot of things. Your disposable income decreases considerably, and you
can no more expect to splurge on certain indulgences the way you did earlier.
It is therefore, necessary to start making certain lifestyle changes to cut
down on expenses. These expense cuts depend on the kind of lifestyle you live.
For example, spending less on clothes and accessories, fewer dinners outdoors,
less partying etc.
3) Review insurance
Before you have a baby, you must also review your existing
life insurance policies and in case you don’t have a policy, you must buy one
immediately. If you have already got a life insurance policy, then you have to
check with your agency to ask if they would allow enhancing the cover. If they
do not provide this facility, you should buy a new policy soon.
4) Check maternity benefits/ leave provided by the employer
If you are an expecting mother, you need to check your
employers’ maternity leave policy and other maternity benefits provided by the
company. Most companies offer paid maternity leave for 3 to 6 months. Some
companies also offer unpaid sabbatical up to a certain period. You also need to
start saving other leaves like sick leave, paid leave, etc. to use for your
pre-natal checkups during pregnancy.
5) Stem cell cover
Stem cells can treat various illnesses and lifestyle
diseases, and new parents are often encouraged by stem cell banks and doctors
to preserve their children’s stem cells. Preserving stem cells becomes
important if your family has a history of certain diseases, like Leukaemia.
Once you decide to go for it, there are other decisions to make like choosing
the right stem cell bank and arranging the money required to meet the cost of
preserving the cells, and deciding whether you want to make a onetime payment
or opt for monthly installments.
6) Devise a long-term investment strategy
In this Child
Plans Having a child is just the start of the biggest responsibility you
could ever undertake. The one thing that will be your biggest concern apart
from your child’s health is his or her education and career. You may not be
unaware of the extremely high cost of education in the country, which includes quality
primary education too. Before you have a child, you need to start finding ways
to regularly invest small amounts that can be later used to fund your child’s
education.
7) Start planning a will
Life is unpredictable and you would certainly not want your
child to be left without someone to look after him or her if anything should
happen to you.
Financial planning for your child does not have to be as
daunting as it seems. With certain right steps (like the ones mentioned above),
taken in time, it can happen very smoothly, thus, proving the adage- a stitch
in time saves nine.
[Source: https://www.tomorrowmakers.com/articles/financial-planning/8-financial-steps-to-take-before-you-have-a-child]
Friday, 22 January 2016
Looking to invest for your child? 7 best options that can secure their future
It is significant for parents to invest in best options to meet
children's educational expenses and secure their future.
For parents, children are the
world. They can do anything to give the best to them and when it comes to their
education, saving becomes the top priority. The rapid rise in education costs
is well known. As per Assocham, the cost of education has risen over 150 per
cent in the last 10 years. According to Ankit Choradia, research analyst, Karvy
Stock Broking, this trend is expected to continue, which makes it even more
important to consider your child’s future as ‘invest on priority’.
Every parent wants his/her child
to get the best possible education without any financial hurdle. For this, it
becomes significant for parents to invest in best options to meet their
educational expenses and secure their future.
If you are looking for some
investment options for your child’s future than this article is for you. With
the help of experts, Financial Express Online has identified seven top child investment plans.
1) Sukanya
Samriddhi Scheme
It is a Government of India
initiative to encourage saving for girl child. It can be opened from the time
of birth till your daughter attains 10 years of age. Minimum of Rs 1,000 and
maximum of Rs 1.5 lakh can be invested every year. Deposits can be made for 14
years and maturity period of the account would be 21 years from the date of
opening the account. The interest rate is an attractive 9.2 per cent per annum
which is subject to change. Like PPF, it is a EEE product and tax exemptions
can be claimed under section 80C. Partial withdrawals are also allowed after
the child attains 18 years of age.
EEE stands for exempt, exempt,
exempt which implies, tax exemptions upon investment, interest received and maturity.
2) Invest
in Gold (Long Term)
Gold acts as a hedge against
equity and during volatile times. Gold ensures your risks in the financial
markets are hedged. Anil Rego, chief executive officer and founder, Right
Horizons, said, “Investments in gold should be either through ETF, gold mutual
funds or E Gold. It is advisable to avoid physical investments in gold in order
to reduce the risk of storage and the cost associated with the physical
holding. Also the prices of the paper gold is derived based on the current gold
prices in the market and hence it is as similar to buying or investing in a
Gold fund.”
Choradia said, “Without gold, a
portfolio is never complete for an Indian consumer. It has always been the
favourite investment option. Events like marriage can be called as mini
festivals of gold. If gold is such an unavoidable metal, why not start saving
for it right away! We believe the best way to do it is through Gold ETFs. It
will help you avoid the hassle of storing physical gold but keeps giving you
the appreciation in the price rise. However, make sure this investment does not
exceed 10-15 per cent of your overall portfolio or only as much as you would
need for the goal.”
3) Risk
cover to protect future goals
You should also take proper term
insurance cover for yourself to secure your child against any unforeseen event.
Though these things do happen, but the probability or chances of happening such
events would be low or cannot be quantified. Rego said, “It is advisable to
have a risk cover in order to reduce or avoid the financial impact on the lives
of your dependant in cased of happening of unforeseen events. Thus one should
make sure that the future costs related to your child’s requirement are
adequately covered in this insurance. Three important expenses to be noted
while going for a cover 1) Education 2)Marriage 3) living expenses till they
become adult.”
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| Child Investment Plans |
4) Equity
Mutual Funds
This ranks right up there in terms
of priority. There are two reasons for this – longer time frame (10-15 years) and
the mode of investment available (SIP). According to Choradia , a monthly SIP
of Rs 5,000 in equity mutual funds for 18 years can fetch you Rs 33 lakh,
assuming a return of 12 per cent per annum. Even considering an inflation of 6
per annum, this amount would more than suffice. However, the key here is not
the amount invested but the time given. Power of compounding has always been
understated. Equity funds have a history of generating 12-15 per cent per annum
returns. And SIP, of course, is considered to be one of the best ways to
average your cost over the long term.
5) PPF
It is one of the favourite
investment options of a lot of experts. The primary reason for recommending
this is the impeccable EEE feature. Moreover, the tenure or maturity period of
this product i.e. 15 years is so very apt in terms of investment for child’s
education or marriage. Another feature of this product is the flexibility in
terms of investment.
You can invest as low as Rs 500
every year and also as and when you want. However, there is an investment upper
limit of Rs 1.5 lakh for this account. Account(s) can also be opened in the
name of your child and it is possible to invest in oneself through one’s own
account, which will double the investment limit.
6) Chose
debt instruments for short term needs
Though major needs like higher
education and marriage are long term based, there are many recurring needs in
short to medium term like – school fees, uniform expenses, clothing and medical
requirement etc. which cannot be taken care by investing in equities
considering the risk and volatility in the short term. “One can choose to
invest in debt avenues like – short term funds, income funds, bond funds (with
lower maturity), fixed deposit in order to avoid market risk. Though returns
from these short term funds may be in the range of 6 per cent to 8 per cent,
however risk too is low or moderate,” said Rego.
7)
Miscellaneous: One should also invest money in building your child’s
skill sets. It can be art, sports, digital media or anything which reaps good
benefits for your child in the future. Also teach your child the concepts of
money and encourage him to save money for his own goals. This will help him
realise the value of money.
Thursday, 29 October 2015
Choosing the Best Insurance Plan for Your Child
Parenting brings immense pleasure and joy to us. Along with
this it brings a sense of responsibility, which can sometimes seem scary. The
best way to avoid such scares is to plan for things which are predictable and
then deal with situations for which we are not prepared.
One situation that we can always prepare ourselves for is the
financial need of the children. Broadly speaking, the needs can be classified
as medical, educational and marriage. Once we prioritise the needs we must
allocate the required funds to meet these needs.
These can be met either by way
of investing in mutual funds or bank deposits in your name and making the child
the nominee or directly investing in the child’s name which will yield you such
sums that you need at the particular time.
While investing in children plans you must keep in mind two
important factors:
1. Inflation – You require the funds at a later date and
therefore must keep in mind the inflation at the time you require the money.
2. The exact time when you need the returns.
Having calculated these, you must analyse the plans that best
suit your needs. There are a few plans, features of which are discussed below.
You must analyse various plans and understand how they work before investing in
the plan. The child investment plans help you to build a corpus that may come
in handy for your children’s needs.
Different plans have different characteristics. You have to
analyse the features in detail and choose the policy with care. Some features
that could be considered for
comparison are listed below:
Self-funding of premiums:
Some of the insurance companies pay the premium from their
own funds in case the policy provider dies. This ensures that the maturity
amount reaches the child as intended.
Flexibility of the plan:
Some plans allow for partial withdrawals; these plans help in
case of urgent needs without disturbing the other planned expenses and income.
This flexibility to switch investments from one fund to another allows you to
capitalise on the market conditions. It also protects you from the volatilities
of the market.
Child
insurance plans are available in two flavours: traditional and unit-linked
(ULIPs). While they are very different in their working and features, both help
in creating the much need financial security. Unit linked plans (ULIPs) are
market linked and therefore come with an inherent risk. The traditional plans
suit the needs of those who are risk-averse.
Children plans have an added advantage over other plans as
they give the payouts to children even if the policyholder is not around. Most
of these plans are structured to give timely amounts for education needs,
marriage needs and sometimes even for the business ventures as seed capital.
Many of the top insurance and banking companies offer child
plans. Here is a comparison between them. Readers are wisely advised to check
the policy details and invest in the one that suits their needs.
In the ULIP category the following child plans are available:
Assessing your needs and future requirements, form an
essential part of buying a child plan. After careful consideration you may
choose to invest in any of the child plans that are available in the market. If
you have risk taking abilities then ULIP plans may work best for you. If you
have a conservative mind set then the tradition plans suit you best.
Wednesday, 28 October 2015
Child Plans
Child
plan secure future of your child as well as offer the financial security for
his education. Most child insurance plans are designed for education benefits.
Today
quality education requires huge amount, hence to meet this tremendous
educational fees these plans are the best option in front of every parent.
All
leading insurance providers offer this plans with attractive premium. These
insurance plans come with lot of benefits such as death benefits or critical
illness benefits.
If
proposer that means parent dies during the policy period, then remaining
premiums are waived and child will continuously get all benefits of the policy.
Some child plans offer medical insurance coverage with the plan for your child.
Hospital
and medicine expenses are covered under this medical coverage. You have lot of
options available for this plan such as sum assured, premium waiver benefit,
policy term and mode of premium payment. Every plan comes with its own
benefits.
Child
plans offers efficient and effective investment for your kid. Unfortunately
if the child dies when policy is in force, then the policy holder will get paid
premium back before commencement of risk and policy will terminate.
After beginning of risk period, the policy holder will get sum
assured or accumulated amount whichever is high. If every thing will work out
finely, then your child will get specified amount as per the policy.
Normally risk period starts after five year of policy for these
insurance plans. If you take the policy in early years of child, then premium
is very low. You can take this policy when your child attains the one year age
or even at the time of birth of the child. These Child
Plan policies pay periodic bonus amount also for unforeseen expenses
of the child.
You can systematically craft future of your kid with the help of
this policy. Premium also depends on coverage area and more coverage will cost
more premiums.
We will help you to find out best child
plans with maximum coverage at reasonable premium. You will get free quotes
from website of insurance companies. These quotes will help you to find out
best deal for your kid. We will help you to understand complicated terms of the
policy documents.
We have negotiated the best for you and you can apply through us
to avail the benefits of Child Plan. We will forward your
application to right insurance provider within no time. You can trust us for
our services and forget all your worries.
Tuesday, 27 October 2015
Friday, 23 October 2015
Child Life Insurance Plans in India
No joy can be greater than becoming a parent and to have
your child in your arms. However, this happiness comes with a new set of
responsibilities. Every parent strives towards providing their kids everything
they would need; starting from birth of the baby to his/her studies and
marriages to their eventual settlement.
The biggest dream of every parent is to provide a secure
life to their children. Every parent wants the best for their kids. Choose a
Child life insurance policy to ensure that their future is bright. Child plans
offer the much needed financial support to the children.
Child Life Insurance Plans assist in handling the expenses
for marriage and higher studies. This becomes more crucial if, due to some
unforeseen circumstances, the family loses its breadwinner. A child plan
secures his/her future under all the circumstances. Its helps you fulfill all
the demands of your children without any compromise. To get a secure future for
your child and a stress free life for yourself, all you are required to do is
to invest a small amount from your income. This will take care of all the major
expenses which you and your kid would face in the coming years.
Importance of a Child life insurance plan?
- A best child plan is needed to make certain that his/her future is secure. It is needed to aid them in leading a life of their choice by catering to the specific requirements and dreams of every child; to make certain that his/her needs are fulfilled at the right time.
- To help them in getting their choice of education as well as assist them in extracurricular interests.
- To ensure that they can choose a career of their interest, without worrying about the economic support.
- To make the dream of a perfect wedding come true; both for parents and their children.
How to select the most suitable Child plan?
If you are wondering on how to choose a suitable child
insurance plan, then have a look at these suggestions below.
- Understand the probable future needs of your child then choose the plan which can fulfill those specific requirements.
- Consider every angle of the risks and your capabilities to bear them.
- Do decide with careful evaluation that whether you want to reap all the benefits at once or at different stages.
- You can choose broadly from two variants: traditional plans and ULIPs.
Best time to choose Child Policy:
There is no specific time. You can decide on best
child plan insurance as soon you realize that it is needed. It can be on
the day when your baby is born or the day he/she goes to school for the first
time.
Things to be careful of:
When finalizing an insurance plan for child, make sure you
have a trusted appointee for the plan. In case of your unseen absence, the
appointee should be capable of taking care of your child in the best possible
way; till your child becomes capable of handling his/her responsibility
himself/herself.
Tuesday, 20 October 2015
Friday, 16 October 2015
Unit linked child plans: Should you buy?
Every parent wants the best for his/her child. It is every
parent’s wish that financial constraints do not come in way of his/her child’s
education or career. Hence, when you are approached with a specific investment
plan to provide for your child’s future education or wedding expenses, the
product becomes too irresistible to ignore.
The sales pitch is so strong that you start to feel guilty if
you choose not to invest in such a product. After all, the product has
everything. It has an element of insurance, offers attractive returns and if
the most unfortunate were to happen, the insurance company pays all the future
premiums on your behalf.
There are many child plans offered by various life insurance
companies. All such products have a similar structure although specifics might
vary a bit. Child plans come in two variants: Unit linked insurance plans
(ULIP) and Traditional (guaranteed payout) plans. Unit linked child plans
provide market linked returns.
Should every parent buy a child plans
for his/her child? Or are there better products available? Is a simple
combination of term insurance plan and mutual funds better than a child plan?
We have always maintained that you must buy those financial products that you
need to buy, not what the intermediary (agent/broker) wants you to buy.
Therefore, before you purchase any financial product, you must
understand all its costs and benefits and compare its performance against the
competing products. In this post, we shall focus on unit linked child plans and
do an objective assessment of the product features and performance and assess
whether such plans should be part of your portfolio. We shall discuss about
traditional child plans in a subsequent post.
Similarities between unit
linked child plans and regular ULIPs
Like regular ULIPs, unit linked child plans are insurance
cum investment products. A part of the premium goes towards life cover
(mortality charges) and other policy charges (premium allocation,
administration, fund management etc) and the remaining is invested in funds as
per policy holder’s discretion. Invested funds provide market linked returns.
If the policy holder survives the term of the policy, the fund value is paid to
the policy holder. Taxation benefits (entire premium counts under IT section
80C), liquidity restrictions (no withdrawals allowed for 5 years) and cap on
charges are same as regular ULIPs.
Unit linked child plans are, in fact, a variant of type II
ULIPs. Under type II ULIPs, in the event of death of the policy holder, the
insurance company pays the beneficiary both sum assured and fund value. Under
type I ULIPs, in the event of death of policy holder, the insurance company
pays only the higher of sum assured and fund value.
How unit linked child plans
differ from regular ULIPs?
Under regular ULIPs, both death benefit(sum assured) and the
accumulated fund value are paid to the beneficiary upon death of the policy
holder and the policy ceases upon payment of such benefits. Under a child plan,
only the sum assured is paid to the beneficiary upon demise of the policy
holder and only the risk cover ceases. The fund value is paid to the beneficiary
only at maturity of policy. The family of the policy holder need not pay any
further premiums to the insurance company. The insurance company will pay the
entire or part of all future premiums. These premiums, like other premium
installments, will get invested and the beneficiary will receive the
accumulated fund value at maturity.
Comparison with a combination
of term plans and mutual funds
We have already established that a combination of term
plan and mutual funds gives better performance than a regular ULIP plan in a previous post. Let’s see
how a unit linked child plans
fares against this combination. We will first do a qualitative assessment of
how various product features will impact product performance.
Unit Linked Child Plan as an
insurance product
Under a unit linked child plan, maximum sum assured is capped at
a certain multiple of annual premium. Sum assured allowed under the child plan
typically varies from 10 times annual premium to 40 times annual premium for
people with age less than 45 years at the beginning of the policy. This is a
limitation as your ability to pay premium restricts your life cover. However,
your child’s future needs do not depend upon your payment ability.
Unit Linked Child Plan as an
investment product
Under unit linked plans, policy holders have multiple fund
options (equity, balanced, debt, money market) etc for parking their investment
amounts. For comparison as an investment product (with mutual funds), you need
to compare the charges because charges eat into the amount that gets invested.
There is no reason to believe that the investment returns will be higher in a
particular product. Hence, the more funds that get allocated towards
investment, the more you get in terms of maturity benefits.
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