It’s almost the end of financial year, and people are busy saving on taxes. So what we have in the store for you? Everybody needs a policy that secures his/her child’s future. But which plan to buy?
An investment plan is categorized in money-back, endowment and ULIP. P Nandagopal, MD and CEO, IndiaFirst Life Insurance says “Generic investment plans cost slightly less due to simple features and fewer benefits. They can be fine- tuned by adding riders and managing fund allocation wisely.” “Most child plans have a catchy name to capitalize on parents’ sentiments. However, there is not much difference between a regular Ulip and a ready- made child plan,” said a certified financial planner.
Special plans and ULIPs offer an extra advantage. “It is easy to understand a product that is directed towards meeting a need and thus makes the buying decision easier,” says Suresh, principal planner.
Here, the advantage of a dedicated plan comes into play.
Your priorities are defined with a specific goal. The fund manager can now easily plan the asset allocation. For example, in the retirement plan scheme, the funds will be allocated when the chances of risk endurance is very high. As maturity near, the funds will be moved forward to debt. This way last minute losses can be avoided. Child plan investments are made in safe assets. Abhay Tewari, chief actuary, Edelweiss Tokio Life Insurance says,”These policies identify elements such as tenure, insurance required and volatility tolerance and hence help those involved take a better decision on how the portfolio should be managed.”
In addition, goal- oriented plans come with features such as premium waiver to take care of premium payments, since you wouldn’t want your child’s education to be affected by any unfortunate event. Another benefit of child plans is that their maturity or withdrawal dates are aligned with life goals. For instance, a child plan provides a multi- stage payment facility. This ensures that you have enough money at different stages. Such benefits aren’t built into a general plan. Therefore, it is important that you are aware enough to fill the gaps between a standard product and a specific goal oriented plan.
Tailored or ready- made
What should you buy? Do you want tailored clothing or ready- made apparel? If you have know- how of details, you can get it tailored to get a dress you desire. But if you aren’t, it is probably better to buy a dress from a boutique that puts it together for you. The same is true for insurance. If you are financially savvy, there is no better option than buying individual products and tweaking them to suit your needs.
Regular policies are more flexible. They are ideal for accumulating wealth through regular savings. On the other hand, a dedicated plan ensures disciplined investment with customized benefits for achieving an identified goal.