Plans allow systematic enhancement of wealth with insurance
No doubt, investment plans are a big boon for anyone looking for a long term investment with higher returns. Despite including a greater risk factor, the investment plans are widely popular at the user end with increasing number of investors almost daily. On the other hand, the child plans that subsist in the market are more secured options having low risk factor that includes ensured returns at intervals.
Plans that include investment along with insurance are called investment plans. A part of the premium the consumer pays is used as a premium and the rest is invested in various sectors depending upon the risk taking capacity of the consumer. The beauty of these plans is that they could be great way to fulfil short-term as well as long-term goals.
The two usual types of investment plans provided by the insurance companies are
1.) Traditional Investment Plans: This type of investment plan offers guaranteed returns since the money is invested in debt funds and fixed deposits. Traditional Investment Plans may provide returns in two ways, either as an Endowment policy or as a Money back policy.
2.) Unit-Link Investment Plans: The ULIP plans invest a part of premium in the stock market. The consumer (policy holder) is able to invest in stock market by buying the number of units of funds as per their premium amount.
The child plans are designed to provide returns (or funds) keeping in mind the future needs of a child. With increase in the cost of education day by day, the child plans are designed to provide the funds a child would require in future. The Child plans work as a security plan for child’s future. These plans assure fixed returns at the every crucial stage in the life of child. For example; if a child is 4 year old and if his parents get a child plan for him, he will get returns at 15 for his higher educational needs, depending upon the premium. The child plans are best and secured way to safeguard the future of child and to start early investing in the future of child. There are two types of Child policies that the companies offer in India; first is Child ULIP and second is Child Endowment plan. The plan a consumer may select depends on the type and amount of policy consumer wants and the tenure he is interested in.
Both the investment plans and the child plans have many individual benefits, and also they share some same benefits too.
The individual benefits of the Investment plans are:
1) Financial Protection: The investment plans provide insurance cover as well as returns at maturity. The amount at maturity helps in fulfilling long term goals, while insurance covers keeps the family assured of financial assistance.
2) Good Returns: The investment plans offer good returns in comparison to other option available in market.
3) Dual Benefits: It also offers dual benefits of money saving and protection.
4) Loan: The loans can also be availed on basis of investments, in case you need money.The individual benefits of Child plans are:
1) Security: These plans ensure the security for the child’s future and availability of resources at later stages of life.
2) Liquidity: It also offers the option of liquidity, by offering partial withdrawals at various intervals.
3) Others: It covers all the future needs of the child. From education to business and marriage all the needs are covered under child plans.
The benefits that both the Child plans and investment plans cover combined is the Tax exemption. Under Section 80C the consumer can get a tax deduction, and under Section 10 (10) D of the Income Tax Act, any income from the plans are tax free.
For an ordinary ULIP and a child plan of equal yearly premium, and an insurance cover, the mortality charge over the full term for an ordinary ULIP would be greater. The death benefits for the child plans is good as the insurance cover is paid to the family and the plan continues with premiums waived, the child gets the fund valve at maturity, where as in the ordinary ULIP the nominee gets the fund value or the cover, whichever is greater. The maturity value for an ordinary ULIP is larger in comparison to Child plan.