Is buying a child plan policy a good idea?
I have a 10-year old daughter and I am planning to buy a child plan policy. Are such policies good?
Vidya Samarth, Pune
Your concern towards your daughter is understandable. However, child insurance plans are investments plans, which provide you with the option to build a corpus for your child which could be used for their education or marriage. These policies work well when your goal is 8-10 years later, by when the administrative costs and charges get amortised. Going purely by returns, you will be better off if you have an investment in a mutual fund, which are cost effective and also have the propensity to beat inflation.
It will be far better to build an investment portfolio to build a corpus for your daughter than look for a child plan. The only advantage of child insurance policies is the fact that they come with a longer lock-in, which forces you to not redeem the investment earlier than necessary.