As a parent, you are always on the watch to secure your child’s future. Investing for their future needs and requirements becomes your topmost priority. One of the best options to invest is in Insurance policies. As they give you both insurance cover and investment benefit. There are also policies designed specially for children. So, before you invest one should assess the policy you need to take. The
children plans are similar to the regular endowment or ULIP plans.
There are basically two categories of insurance policies for children traditional and unit linked insurance plans (ULIP).
Traditional plans:
In this plan there are endowment and money-back policies available. In an endowment policy you have to make a payment for the premium amount yearly and at the end of the policy tenure you get back a huge amount. These are your sum assured and bonuses. As this plan invests in debt market the returns are low.
A moneyback policy is designed in such a way that you make annual premiums and at various intervals you get some amount back so you can provide for your child’s needs at different stages. These payouts are already decided or in built in the policy, so you cannot fix the period or amount. This kind of policy also invests your funds in debt markets.
ULIP:
ULIP plans give you an investment and insurance cover. You can choose from various funds like equity or debt funds and even a mix of both. This plan gives you better returns as the funds are market linked. You also have a choice of switching between funds and choosing your portfolio depending on the risk one can take. You can choose at what age you what funds for your child’s needs.
Hence before investing in an insurance policy for your child take a look at all the policies available in the market. As in traditional endowment plans the returns given are annually based on the bonuses declared by the company. If you cannot afford to take a high risk an endowment policy is the best. And if you want to keep your horizon for more than 7-10years and can take high risk then you should invest in ULIP schemes. You can invest in equities and get higher returns over a period of time.
