Child Insurance Plan

help create a corpus for crucial stages in the child’s life

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Investing for Kids

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There are different child plans with various costs, time-frames, risks and returns associated with them. There may not be any one best investment plan suitable for all - choosing them wisely in terms of these factors is a vital part of your financial policy.

Investments are not exclusive instruments meant for the grown-ups. There are investment plans available for kids even if they never had any idea of the importance of earnings, savings and investments. These investment plans, popularly known as child plans, are meant to maximize the returns that children could get when they have grown up at different occasions in life. And it would be a good Policy to have some funds earmarked early in life to make the most of the best investment plan available for your child.

Child Plans from Insurance Companies:

This tends to be one of the most popular investments when it comes to investing for kids. Let's take a look on different investment options available for child plans:

Investments in Traditional Child Plans:

Of the two types of investments that you could make into child plans – Traditional Child Plans and Unit-linked Child Plans – the traditional investment plans have always been seen as one of the safer options that assure you of fixed benefits in the future. One of the common concerns of parents is to find the best investment plan that would meet the growing needs of child’s educational and other expenses. It would be a good idea to make investments in a policy that would squarely address the set of needs associated with investment plans.

The benefits of traditional child plans in terms of competing for the ‘best investment plan’ status are:

  • Unlike Unit-linked plans, benefits are not linked to market performance of underlying funds, hence account for regular returns on investments.
  • Planned and expected returns at key educational milestones at various stages of the child’s growth.
  • Tax benefits for premiums paid as well as for the returns obtained from the policy.
  • Lump sum payments of sum Assured in the event of death of the parent.
  • Other Riders to choose from, such as Accident and disability rider or the Income Benefit Rider.

Unit Linked Insurance Plans:

Child plans could also be in the form of a policy that provides insurance Coverage apart from their providing for investments that deliver reasonably high returns, as in the case of the Unit Linked Insurance Plans. Some of the advantages of ULIP are:

  • They provide for Risk cover in the form of insurance
  • They provide for investments that are essentially routed into high growth avenues
  • They provide flexibility in the form of withdrawal of amounts over a period of time, after an initial lock-in period
  • They provide for future income generation in terms of appreciation of investment value

The disadvantages, however, include factors that are linked to market conditions – these are investment plans whose rates of returns are determined by the performance of the funds in the financial markets. Hence, it is arguable if they can be termed the ‘best investment plan’.

Investment in Mutual Funds:

These are increasingly popular investment plans that combine the best of both worlds. Some of the striking features of mutual funds to contend for the title of the best investment plan are:

  • You could take advantages of designated mutual funds for children, such as lower costs.
  • You could choose from among different options based on your appetite for risk.
  • You could combine debt and equity in your own chosen basket of investments.
  • You could benefit out of tax advantages – mutual funds are taxed on Maturity and hence, parents’ incomes would be coupled with the major children’s incomes then, from a tax perspective.

Choose your child plans carefully based on your goals, your family circumstances, your financial aspirations and the stage of life you are in, and you could reach your goals in style with time.