You should consider investing every month in an equity mutual fund scheme to meet your long-term financial goals like child's education
23-Oct-2015 •Research Desk
I am very impressed with your suggestions published in Sakshi Newspaper. I need your help for my investment plan. I am 30 and my monthly income is ₹52,000. I got married recently. I bought Jeevan Mitra (Triple Cover Endowment Plan) (Table no.133) for 30 years for my life insurance needs. I am paying a premium of ₹33,640 from September, 2013. Sum assured is ₹8 lakh. Is it good to have this policy or should I surrender it and take a new policy. I also need to buy an insurance policy for my wife. My company provides a health insurance cover of ₹3-4 lakh per year. Please advise me on how to plan my investments for my kid's education (I am expecting a kid next year) and a home (2bhk in Bangalore costs around ₹40 lakh).
- Madhusudan Rao
Endowment plans are worse than ULIPs because they don't provide any information on charges and investment portfolio. Jeevan Mitra is not an exception. You must have already paid three annual premiums. If you surrender the policy now, insurer would pay you 30% of all premiums paid till date minus the first year's premium as a guaranteed surrender value. You might get a little more, but it is entirely at the discretion of the insurer.
However, before surrendering the plan, buy a pure term insurance policy to insure your life adequately. If your wife is working and contributes to financial needs of the family, you should buy a term plan to cover her life.
Health insurance cover from your employer will be over when you leave the organisation. You must have an independent health insurance cover. Buy a basic health insurance policy for ₹3 lakh. Whenever you leave a job or need a higher cover, buy a super top up policy that will get activated if the claim amount exceeds the deductible amount in a year. Choose deductible equal to your basic health insurance sum insured.
You should invest every month in an equity mutual fund scheme to meet your long-term financial goals like child's education. Start a Systematic Investment Plan (SIP) in one or two diversified equity scheme to build an education corpus for your child. Here is our list of best diversified equity schemes.
We have assumed that you would need the money for your kid's higher education after 18 years. We have also assumed that the current cost of higher education is around ₹10 lakh. At 8 per cent inflation, the cost of education would rise to ₹40 lakh in 18 years. You can accumulate this amount if you invest ₹5,220 every month and if your investment gives 12 per cent annual returns.
If you are planning to buy a home only after five to seven years, you can consider a monthly SIP in a diversified equity scheme to build a corpus for the downpayment. If you want to fund the purchase with your investment, it will take a little longer.