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HOME | MONEY | PERSONAL FINANCE | INSURANCE |
March 31, 2000
- Banking |
Insuring your childLarissa Fernand This could be done for a variety of purposes. Either you would like to insure your child for higher education or for marriage. Or maybe just as a safety net. Savvy planning should see to it that it is not a hindrance. The key is to start planning when the child is very young. You can opt for a scheme that requires you to pay a premium, which means you will have to put a small amount aside every month. Or you could opt for a scheme that requires you to put a lump sum once and for all. The problem is that it is difficult to determine the actual rate of return based only on the premium paid since there are loyalty bonuses, and age of entry & exit of the scheme and the amount insured are other variable factors. Most schemes also waive the premium if the parent who bought the policy expires. As for tax benefits, UTI schemes get the benefit of section 80L of the Income Tax Act, while Section 88 applies to LIC schemes.
Your child is: A girl not more than 5 years old.
Your child is: Not more than 10 years of age.
Your child is: Not more than 12 years old.
Your child is: A girl between the age of 1 and 12.
Your child is: Not more than 15 years of age.
Your child is: Not more than 17 years of age.
A common characteristic of all the above schemes is the assured return. But if you are willing to take some amount of risk for a higher return, then check out the mutual fund schemes specially designed for children. Currently, there is the Tata Young Citizens' Fund, (TYCF) Kothari Pioneer Children's Asset Plan and UTI's open-ended Children's College and Career Fund. Do verify with each as to which instruments they predominantly invest in, whether they tilt more to debt or equity or are balanced funds. The TYFC provides an accidental death coverage for the child that is 15 times the amount invested, though the upper limit for the coverage is Rs 1,50,000. In the Kothari Pioneer Plan, you can opt for the education or gift plan. The former gives a regular dividend after a lock-in of only four years. But the investment made when buying the units can be withdrawn once the child has turned 18. Under the gift plan, there is a dividend option (opt for dividend payments) and a growth option (dividends are reinvested in the scheme). The UTI plan offers regular dividends after the child turns 18 and the fund has to be liquidated by the time the child is 26 years.
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