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What's Better For Your Child's Education: Investment or Investment + Insurance?

Updated On Mar 16, 2022

When comparing Investment vs. Investment + Insurance, the former refers to any type of investment instrument, such as stocks, mutual funds, etc., whilst the latter refers to a child insurance plan. A child insurance policy combines insurance and investing. It provides the financial security of the policyholder's kid. Because life is uncertain, this plan provides death benefits to the child by insuring the life of the insured parent. The maturity benefit is paid in a lump sum if the insured lives are longer than the policy term. As a result, policyholders can use the money toward their children's education or other significant life events.A flexible payout option is also included in the kid plan to assist the policyholder's child financially at critical life milestones. A mutual fund is formed when a significant number of people pool their money for the same financial aim. After money has been collected, an Asset Management Company is responsible for investing it in shares, stocks, bonds, and other market instruments. You hold a specific unit of one type of investment in a mutual fund with other investors who possess units in the same fund. The Net Asset Value (NAV) of each unit is used to exchange it (NAV).

Insurance + Investment vs. Investment

Let's take a closer look so you can make an informed decision:

  • What Exactly Is the Procedure?

A portion of the premium is invested in an insurance + investment plan, with the remainder going toward life insurance. This service is provided through Unit Linked Insurance Plans (ULIPs). An investment instrument's primary goal is to raise the value of the money invested. The vast majority of monies are spent wisely. A fund with the appropriate mix of equity and debt may be chosen based on one's investing objectives.

  • Consider the Following Advantages

Long-term wealth growth through investments vs life insurance with investments and other benefits falls under the Investment+ Insurance category.

  • The Advantages of Taxation

Section 80C allows you to deduct the tax benefit premium you pay for a ULIP. Only investments in an Equity Linked Savings Scheme (ELSS) are eligible for a tax advantage under Section 80C. Partial withdrawals or maturity sums are likewise excluded under Section 10 of the Income Tax Act (10D).

  • Investment Commissions

The fund administration charges are subtracted from the total amount invested. Because they include insurance, ULIPs are slightly more expensive than mutual funds. Management fees, loads (entry and exit), transaction fees, and other expenses are deducted from an Investment Fund's invested money.

  • Risk Appetite's Importance

A child plan is a type of insurance and investment plan that includes both life insurance and investment components. As an insurer, you invest a percentage of your premium in market funds such as stock and debt funds, among other things. As a result, a child plan provides security, and the insurer invests your money based on your risk tolerance. The idea behind mutual funds is that the more risks you take, the more likely you are to make a profit. Mutual fund investors, on the other hand, are concerned about market risks.

Conclusion

Investments and child insurance policies are also feasible possibilities. When it comes to creating a healthy corpus for your child's future, you don't want to take any chances. Mutual funds are an excellent financial vehicle for someone who is disciplined in the face of market volatility and is willing to bear significant risks. A kid plan, on the other hand, provides a consistent income stream as well as a life insurance policy that protects one's child's future in the event of an untimely death.

Also Read: Build Your Child's Overseas Education Corpus With These Tips

Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.

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