Conventional Child or Term plus SIP for 15 Years Tenure?

Good financial planning is the secret of a successful family when it comes to wealth management for taking care of every major financial need of each of the family members. Life insurance plays a major role as a financial instrument that protects the family of insured party in case of untimely demise of the policy holder. With time the term insurance has evolved a lot and many variant products are available to customize different needs of the people.

Conventional Child Plan

This gives the policy holder the opportunity to include the child in the term plan taken by him/her.  Insurers offer child plans to the policy holders for the welfare of their children in case of their untimely death. For Example, Mr. Ravi has taken a child plan from the insurance company where his minor daughter Kiran was included, Kiran is currently 5 years old. The child plan does not insure the life of Kiran but in case of the untimely death of Ravi, The insurance company will provide the necessary future support for Kiranbased on the Child plan purchased by Mr. Ravi. The plan is for Ravi where the detail of Kiran is mentioned as the future beneficiary.

Certain features of Child Plan include:

·         Policy Term, Premium Amount and Maturity Amount – Policy term should be determined based on when the child requires the benefit of the plan. In case of Kiran, who is currently 5 years old, a 15 year term will enable her for the benefits when she attains 20 years of age. Premium amount is calculated keeping the maturity amount in mind

·         Riders, Benefits of the plan – Certain add on are imperative like the Waiver of Premium that means during the tenure of the child plan if the policy holder (parent usually) dies, the future premiums that were payable by the policy holder will be waived though the benefits of the policy as it was mentioned in the plan will remain unchanged. This will benefit the child of the insured for the future. Some other optional but important benefits are: Accidental Death or Disability Benefit, Critical Illness benefit

·         Partial Withdrawal – Many times rather than waiting for the maturity, many parents withdraw partial amounts at different points based on the requirement for the child

Term plus SIP

This is the financial instrument where the customers get the benefits of both life insurance coverage as well as the investment benefits. Let us consider the case of Mr.Rishi who is working at a MNC and want to have investment that will give return in future as well as serves a life coverage. There are similar instruments offered by different insurers, and Mr. Rishi is considering the following after some market research based on his requirement, affordability and eligibility:

·         The Policy term will be 15 years

·         The policy should give life coverage plus financial income

·         Premium payment term and Policy term will be same

·         Terminal Bonus and vested reversionary bonus will be paid lump sum at maturity

·         Guaranteed pay-outs will be at 11% rate of sum assured and this will be paid annually and for next 15 years after the maturity of the policy (Note: There could be the option to get the lump sum maturity amount in one shot. that is the sum total of: 110% of basic sum assured, Terminal Bonus and Vested Reversionary Bonuses)

The policy could be customised using different Riders as required like Critical Care, Accidental death Benefits, Permanent Disability Benefit etc.

Rishi’s selected Policy Product Resembles the following:

Policy Term	Minimum Age of Entry	Maximum Age of Entry
7 years	11	58
12 years	8	53
15 years	8	50
Age At Maturity	Minimum:  18 years	Maximum: 65 years
Sum Assured	Minimum: ?100,000	Maximum: No limit
Premium Frequency	Monthly/Quarterly/Half Yearly/Yearly
Pay out Period	15 years
Pay out frequency	Yearly

In case of Premature Death during the term of Policy, the nominee receives the higher of:

1. a) 105% of all the premiums paid by insured until death and
2. b) Sum Assured on death + Vested Simple Reversionary Bonuses + Terminal bonus, if any

Comparison of Conventional Child Plan and Term plus SIP

While both the plans have the life coverage as common feature, the other benefits are specific to the individual requirement. If Kid’s education and future is priority then Child Plan is preferred and could be done lump sum or partial withdrawal of maturity amount as needed. Whereas, for a preference of pay-out for prolonged period, Term plus SIP is the right option.

Source: Conventional Child or Term plus SIP for 15 Years Tenure?

Which is the best future investment plan for a girl child?

Having a girl child is every parent’s dream. And if you happen to be a girl child to your parents, your parents will be concerned about everything starting from your upbringing, schooling, education, marriage and the list never ends. And money plays an important role in fulfilling obligations like higher education, marriage and others.

Financial planning will take you a long way in achieving your aspirations. You should start your financial planning as soon as a child is born be it girl or boy. But a girl child is very special for every parent.

Every father thinks of making his daughter independent, get her married and settle down in life. Parents keep their wishes at the last spot and priority is being given to children especially the girl child as a girl is the most close to her father.

Let us discuss the various options available for investment if you have a girl child and how you can choose them wisely to secure them financially.

Options for investing:

SIPs

SIPs is an abbreviation for systematic investment plan. SIPs are mutual fund wherein you can invest money at frequent intervals mostly every month for creating corpus fund. It does not require you to pay a lump sum amount and the money is invested into equities market or debt market or a combination of both. Financial experts recommend investing in SIPs at an early age so that the investor can enjoy the benefits of compounding.

Gold ETF

You will have the desire to gift gold to your daughter during occasions and marriages. GOLD ETF is one of the best options for investing keeping a girl baby in mind. Gold ETF (exchange-traded funds) is gold in paper form and not in physical form. Gold ETF serves two purposes, one is it creates a well- diversified investment portfolio and can be used for your daughter’s wedding.

SukanyaSamridhiyojana

It is a small deposit scheme introduced by the Prime minister Narendra Modi under the betibachaobetipadhao program. This scheme was introduced for encouraging a girl child and to ensure a girl baby can have a shining future for herself.  The main objective of this scheme is to meet the education and marriage cost of the girl child. Investing in this account gives attractive rate of interest and the income of deposits is exempt from taxation.

An account in sukanyasamridhiyojana (SSY) can be opened after the girl child is born and up to she turns 10 years of age. You can open this account in post offices or authorized banks by investing a minimum of Rs.1,000/- and a maximum of Rs.1.5 lacs during a financial year. Also, you can withdraw 50% of the balance for education purpose after the girl child attains 18 years of age.

Child insurance plan

Child insurance plan is an insurance plan wherein you invest money for a fixed period of time and get returns after the policy matures. The thought of any unwarranted situation making the child financially unsecure is always at the back of your mind. To ensure the security of child, you should buy a child insurance plan as it ensures that in case of sudden demise of the bread winner, the child will have adequate financial resources to fulfill his aspirations.

Many insurance companies are offering child plans with features like:

ü  Riders for premium waiver and sum assured to the nominee in the event of death of policy holder.

ü  Pay premium one time or at fixed intervals like yearly, half yearly or quarterly

ü  Sum assured decided keeping in mind the inflation and the future cost of higher education

ü  Withdraw the funds partially as and when needed and not when the policy matures

ü  Takes into account the age of the child while arriving at the tenure of the policy

ü  Enables to build a huge corpus required to fund the child’s future needs like education and marriage

You can buy a child plan online by comparing the plans offered by various insurance companies. There are several websites, which help you in comparing the benefits offered and selects the one which best suits your need.

To ensure a girl baby’s future, you should definitely buy a child insurance plan to secure her dreams and ambitions financially.

Source: Which is the best future investment plan for a girl child?

5 THINGS YOU SHOULD KEEP IN MIND WHILE BUYING A CHILD INSURANCE PLAN

You, as parents are concerned about their future education and can sacrifice on their own leisure expenses, if need be, but do not want to compromise on their children’s future.

Buying a children plan ensures that your child’s future aims and ambitions are attained and will not be impacted financially due to any unforeseen circumstances. Below are the top 5 things you should keep in mind while buying a Child Insurance Plan.

• Education cost and Inflation

While deciding the sum assured, you should take into account the estimated future education cost and inflation. For example, an MBA today costs Rs.12-15 lacs in a premier institute. So, you need to take the cost 10 or 15 years down the line.  Ideally, the sum assured should be over 10 times the current income of the policy holder.

• Tenure of the plan

Deciding the tenure of the policy  is very crucial as it makes you plan things accordingly. Suppose, your child is of 8 years now, and you believe once he is 18 years, he will be sure of the field he wants to pursue his education. That will be the time you will need money to help him pursue his dreams. So, you can select a plan with 10 years maturity period.

If you ignore the link between age of the child and tenure of the plan, you might face a cash crunch as you will need funds before  policy matures. The period of a policy should be decided as to when the child will attain 18 or 21 years of age.

• Partial withdrawals

Many a times, you would want to get the funds as and when required and not when the policy matures. You should look for partial withdrawals clause. Managing the education cost becomes much easier if you can withdraw money after a fixed interval.

• Riders in child insurance plans

A rider is an additional benefit provided to the existing plan. The insurance companies charges extra premium for adding a rider to the plan. Policy holder should know about the riders offered by the insurance companies as these riders enhance the procedure.

Some riders offered by insurance companies are:

Premium rider

These days, insurance companies offer child plan with inbuilt premium rider clause. In case of untimely death of

policy holder, the balance premium payments are waived off and the nominee is entitled to get the benefits after policy matures.

If you are buying a plan, it is advisable that you look in for the premium rider clause.

Death Rider

In case of untimely death of the plan holder, the nominee gets a lump sum amount from the insurance companies. This rider ensures that the procedure does not lapse due to unfortunate events.

Other riders available are income benefit, accidental benefit, critical ailments etc. Riders vary from companies to companies and the person proposing to buy a policy should be aware regarding the riders offered.

• Compare child plans online

Finding the best children  plan as per your need is the easiest way to know about the various plans offered by insurance companies. It is convenient, paper less and hassle-free. You, also, have a customer assistance 24/7 that can help to sort all your queries. While comparing policy online, you will have to fill in personal details like the age of the parent and child, current income etc.  Comparing and buying plans online helps you save the time of going to the insurance agent or the insurance company.Also, you can download the brochure of children plans from the insurance company’s website.

By now, you know the things to look in while buying a children plan. For the purpose of securing your child’s future, you should invest in a children  plan which works as an insurance cum investment plan thus enabling your child’s dream turn into reality.

Source: 5 THINGS YOU SHOULD  KEEP IN MIND WHILE BUYING A CHILD INSURANCE PLAN