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POSTED BY ON March 20, 2012 1:41 pm COMMENTS (7)
Hi Manish,
REcently I was approached by an LIC agent to take the CHild Future Plan for my daughter who is 1 year now. Following is an eg fig of what he told:
For a Sum assured of 3 Lakhs, I must be paying roughly 16800 per year uptill the kid turns 18. I would be getting 30 K in the 19th, 20th and 21st ear. 75K at 22nd year and roughly 4.84 Lakhs at the 23rd year. In case of death of the parent. The premium would be waived off and the kid would be getting all the above mentioned amounts as such.
Please suggest me if I should go for this ? or are there any other products better than this?
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Finally I have decided to say a big ‘NO’ to him…(though its difficult to,as the agent is also ur long time neighbour…:D ) but I’d put our hard earned money judiciously atleast now onwards… Thanks to Jagoinvestor !Already both of us have a Jeevan Anand Policy each , which was taken 3-4 years back(when we were ignorant of all these facts…)
Each year we end up paying almost 42K towards our LIC premium..
Also we have a Housing loan of 30 Lacs and pay almost 30K towards EMI.
Now WHAT WE HAVE DECIDED IS:
– To buy a term insurance of 50Lacs each (one in my name and one in my spouse name).
– I already have a ppf a/c and planning to open a PPF for my husband and kid too (if possible)
– Try to invest in a good mutual fund
Few queries that I need to clarify:
– Please suggest me a good term plan .. (Aegon Religare looks good with the riders…and also Aviva too …pls suggest ,me on this)
– How exaclty to chose from all the available MFs , I do not have any idea on how these works and want to invest in less risky areas.. please suggest me a good product.
Thanks Much Experts :))
Dear Sajna, You wrote that you are paying 30K EMI for your home loan. 30K EMI means you should have a minimum emergency funding of 2.7L Rs. just for EMI for 9 month period. Add the living expenses of you & your family + other investments & I feel the figure ‘ll reach close to 5L Rs. So before jumping into any investment product, prepare your emergency fund over the next 3-6 months period.
Rest thing we may discuss after this funding is there with you.
Thanks
Ashal
Thanks guys 🙂
Hi Sajna,
It is excellent to see you feeling the urge to question the product being sold by your insurance agent. I strongly discourage all of my clients not to go with any Investment linked insurance plan. My other fellow boarders have also confirmed my views.
Regards
Banyan Financial Advisors (BFA)
Dear Sajna, If possible to you please purchase at least 10 times of your annual income term cover. Then only think of investing for the future of your d’ter but not in this LIC children future plan.
As already discussed for you the benefit of MFs or PPF, hence not elaborating more on to it.
thanks
Ashal
Sajna – Investment and Insurance is akin to drinking and driving. They just do not mix.
To put this in perspective the IRR of your return is a paltry 5.74%. To do this enter the outflows of each year -16800 say from cell A1 to A18. A19 to A21 will have +30k and A22 will have 75k and A23 will have 4.84 lacs. Put the formula “=IRR(A1:A23)” in A24 and you will see the return.
Alternately if you take away Rs 1000 from that premium and buy a Term Insurance of 5 Lacs and invest the remaining 15800 in PPF alone you get a corpus of about 6.4 lacs in 18 years which is way above the LIC plan.
I have nothing much to add really than what wealthucreate has already said but rephrasing his answer:
1- Buy Term Insurance for 7-10 times your annual income + Any liabilities
2- Invest judicously in PPF and Mutual Funds.
3 – Stay away from such policies.
This will automatically put you on the path of growing your money.
One Word “Stay Away”. Dont go by the name of the product. These child insurance are not great product for investment. planning for your kid cannot be different than what you would do for your retirement.
MF+PPF is better combination. Make sure you have term plan for yourself.