Monday, June 15, 2009

Insurance for my 6 month old baby

Never mix investment with insurance

Mr.Sanjay Lala wrote :

my son is of 6 months and i need such a insurance plan so that after 15 & 20 years i could get good amount for his future career. Please suggest me some good plans.


Dear Sanjaylala,
I have always advised against mixing Investments with Insurance. Insurance is not Investment.
Insurance have high costs associated with their products and they bleed you dry immediately after you pay the first premium. And the worst part is, that since you have already incurred the maximum loss by the payment of your first premium, they do not care if you chose to discontinue, they have already squeezed you dry.
A Diversified Mutual Fund is not only costs cheap but also very transperant, easy to understand but also give you more or less the same returns than the Insurance, in fact, more often than not ,they give you MORE returns than Insurance.
First cover your Life with Adequate Term Insurance. Then invest in Good Diversified Mutual funds. About 2-3 years before you require the amount, slowly start switching from Equity Funds to Debt Funds and Arbitrage Funds to protect volatility.
I suggest the following funds for Long Term Investment. These funds should give Good Returns.
1. Birla Sunlife Frontline Equity Fund
2. DSPBR Top 100 Fund
3. Fidelity Equity Fund
4. HDFC Top 200 fund
5. Sundaram Select Focus Fund

Do invest in them regularly through sips and you can be sure to get Returns better than any Insurance Plan can give you.

You can also look at Mutual funds which offer Free Life Insurance Cover

1. DWS Tax Saving Fund offer 5 times your investment as Life Insurance Cover and can be considered for investments.

2. Birla Mutual Fund also offers Life Insurnace cover through its Birla Century Sip and among the Birla Funds you can consider Birla Sunlife Frontline Equity Fund, Birla sunlife Freedom Fund and Birla Sunlife Equity Fund

3. Kotak Mutual Fund also offers Life Insurance Cover wherein in case of death of Parent, the fund will invest the Balance Sips in the name of the Child. Among Kotak Funds you can consider KOTAK K30 FUND.

4. Reliance Mutual Funds is also offering Free Life Insurance Cover through SIP Insure. Among Reliance Funds, you can consider RELIANCE GROWTH FUND AND RELIANCE REGULAR SAVINGS FUND - EQUITY.

Best of luck,
Srikanth Shankar Matrubai

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