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Thirty-year-old Amit Goenka had just become a father of a baby girl. After the initial euphoria subsided, he decided to buy an insurance plan — Life Insurance Corporation’s (LIC) Komal Jeevan plan, a child unit-linked insurance plan (Ulip) to secure the future of the family’s newest member.
Child Plans:
He is one amongst the huge tribe of parents who have chosen to put their faith in child Ulips that promise continuity in the funding of the child’s education even in the event of the parent’s death. These schemes have been best sellers for most life insurance companies and thus form an important part of their portfolio.
It is easier to strike a chord with parents by talking about insulating their children’s future from any undesirable events. Consequently, selling child plans is easier as well. Many parents, thus, are completely taken in by the idea of achieving their dream of their child being able to complete his/her education in their absence.
In addition to the sum assured that is paid at the time of the policyholder’s demise, future premiums are waived off and the fund value is made available to the child on maturity. Riders providing for loss of income arising out of the parent’s (the insured) death or disability are also touted as one of the reasons why child plans score over other investment options.
Most companies also offer waiver of premium riders, which ensures that the company continues to pay the premium if the parent passes away. Over a period of, say 15 years, regular investments will ensure that the fund grows into a substantial amount, which may not be possible in case of a one-time , small lump-sum investment.
Mutual Funds:
Like several other parents, Amit, too, had various options to choose from. For instance , simple bank fixed deposits, Public Provident Fund (PPF), Reserve Bank of India (RBI) bonds, diversified equity mutual funds, post office instruments like monthly income scheme (MIS) and, of course, pure equity (stocks).
Most parents, if not all, invest in more than one product to secure the future of their children, provided the pocket permits the luxury.
Many fund houses also offer schemes dedicated for children. “Apart from two child Ulips, I also invested in a mutual fund scheme dedicated for children ,” Amit adds. For instance, UTI Mutual Fund offers CCP Balanced Fund and CCP Advantage Fund.
Source :- The Economic Times |
