help create a corpus for crucial stages in the child’s life
The demand of child insurance policies has seen a steep rise in the last couple of years. Parents are more concerned about the betterment of their children. They want to fulfill all the wishes of their children, be it pursuing higher studies, starting up a business, or acquiring a flourishing career. They can make their dream come true by investing intelligently in lucrative child plans that are available these days in the market.
Take a look in the life insurance Policy market. You would find dozens of policies available with various reputable insurance companies for children. There is a possibility that you might get stuck while deciding which insurance plan should you buy for securing your child’s future. We would discuss here mainly about two types of child plans that are available in market, the ULIPs plans and traditional plans.
Many prospective policy holders are more inclined to invest in ULIPs. The ULIPs are more popular in market as they offer twin benefits. One is the benefit of life insurance and other is the benefit of mutual funds. In case of ULIPs, the Maturity benefits is not fixed or constant because of the high return and Risk potential of the equities. On the other hand, a traditional child policy guarantees a fixed sum at maturity. This is a major factor for deciding which plan is better for your child. Think about your preferences. If you want to avail dual benefits, choose a ULIP or if you want to benefit a fixed sum at maturity, opt for a traditional policy for your child.
The aim of life insurance policies is to provide life cover for long term duration. Along with that, the saving part aims to attain the financial goals of the policy holders. This is done either by creation of wealth or by providing regular income. So, it is you to decide whether you want wealth creation over the time or you want provision of regular income. ULIP plans are for wealth creation. And, on the other hand, traditional child plans aims at capital preservation or protection. So, if you think that wealth generation is more important and would help your child better, choose a ULIP plan. On the other hand, if you want a guaranteed sum after the completion of the term, opt for a traditional plan.
It is important to note here that the prospective policy holder should check his/her capacity to take risk. This is going to help a lot when you are about to choose the best child plan for your kid. Know your own abilities and potentials to encounter risks that you may face with respect to investment. How can you determine your ability to endure risks? You can do this by analyzing your outstanding liabilities. For example, your outstanding liability could be your home loan or any other loan that needs to be repaid. You should also consider your definite financial works that you need to do in near future or any other expense that is supposed to be fulfilled. You should analyze all these factors to find out whether you are capable to take risk or not while you are investing in a child plan for his/her betterment
Consider all the above quoted parameters before you jump to any conclusions on choosing the right child plan for your kid. Both ULIPs and traditional child plans have their own merits and demerits. It is all on you to decide which policy is best for your child. Invest plenty of time to explore more about different child plans. Take help of different resources to understand more about them. This is going to help you in making an informed decision