Types of Child Plans

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Types of Child Plans – Take your pick

Child ULIPs – A fraction of the premium flows into debt instruments and the rest into equity instruments. The decision of switching between the funds remains in the hands of the insured. Since it’s a market linked plan, the return is decided by the net value of the assets at the maturity period.
Child Endowment Plans - The premium flows into debt instruments, the decision of which is at the discretion of the insurance company. Return is decided by the bonus payable on maturity.

A Word of Caution

It is very important to choose a trusted appointee for your child plan. An appointee should be someone who shares a deep relationship with you and can be counted on to take care of your child in your absence. An unfortunate eventuality passes on the claim amount to the appointee who takes care of the child, till the child becomes capable of handling the money himself. If the appointee turns out to be cunning or careless, it thickens the chance of the money getting spent on anything but the child or being exhausted till the child reaches at an age he needs the most. So it is best to be double sure before you choose an appointee for the policy.

Quick Tips

  • Start early – Buying a Child Plan earlier will enable you to collect the corpus for a longer term, thus adding substance to your Maturity Amount.
  • For a shorter policy term i.e <10 years, prefer Child Endowment Plans.
  • For a longer policy term i.e >10 years, prefer Child ULIPs.
  • Investment Gurus suggest that best child plans to invest in are the Child ULIPs, as the focus should be on equity instruments for the initial periods of the policy term to tap the maximum market profits and as the policy term reached its end, the funds should be transferred to debt instruments to stabilize the profits thus made.

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