Investment vs Investment + Insurance, What's Better For Your Child's Education?

When we compare Investment vs. Investment + Insurance, the former refers to any type of investment instrument such as stocks, mutual funds, and so on, whereas the latter refers to a child insurance plan. A child insurance policy combines insurance and investing. It provides the policyholder's child with complete financial security. Given the uncertainties of life, this plan provides death benefits to the child by insuring the life of the covered parent. The maturity benefit is paid in a lump sum if the insured lives longer than the policy term. As a result, policyholders can use the money toward their children's higher education or other significant life events. Not only that, but a child plan includes a flexible pay-out option to assist the policyholder's child financially at key life milestones.A mutual fund is formed when a significant number of individuals pool their money with the same investing goal. An Asset Management Company is in charge of managing the money that has been accumulated and investing it in equities, stocks, bonds, and other market instruments. You hold a specific unit of one type of investment in a mutual fund alongside other investors who hold their units in the same fund. The Net Asset Value (NAV) of each unit is used to exchange it (NAV).

Investment vs. Investment + Insurance

Let's find out more so you can make an informed decision:

How Does It Work?

A portion of the premium is allocated to life insurance, while the remainder is invested in an insurance + investment plan. This is a solution provided by Unit Linked Insurance Plans (ULIPs). The sole goal of an investment instrument is to grow the capital invested. Almost all of the money is put to good use. A fund with a proper proportion of equity and debt might be chosen based on one's investing objective.

Key Perks 

In Investment+ Insurance Life insurance plus investments and other benefits, versus long-term wealth building through investments.

Tax Benefits

Sec. 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 tax deduction under Sec. 80C. The Income Tax Act additionally enables exemption on partial withdrawals or maturity amounts under Sec. 10(10D).

Investment Fees 

Fund management fees are taken from the total amount invested. Because ULIPs include an insurance component, they price a little more than mutual funds. Management fees, loads (entry and exit), transaction fees, and other expenses are deducted from the invested money in an Investment Fund.

Risk Appetite and Its Importance

A child plan is a type of insurance and investment plan that includes both a life insurance and an investment component. As an insurer, you invest a percentage of your premium in market funds such as stock and debt funds, as well as other securities. As a result, a child plan provides security, and the insurer invests your money according to your risk tolerance. Mutual funds are totally founded on the idea that the more risks you take, the better your chances of making a profit. Mutual fund investments, on the other hand, are vulnerable to market risks.

Conclusion

Mutual funds and child insurance policies are also smart investment possibilities. When it comes to establishing a healthy corpus for your child's future, though, you don't want to take any chances. For someone who is disciplined with market volatility and can take significant risks, mutual funds are a terrific financial instrument. A kid plan, on the other hand, provides a stable income stream along with a life insurance policy that protects one's child's future in the event of his or her untimely death.

Also read- How to Fund Your Child’s Higher Education With An Insurance Plan?

Education Loan VS Education Plan: What Helps In Building A Child’s Future Well?

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.