Securing your child’s future is of paramount importance for all parents. Well, accumulating funds for it might sound like a daunting endeavour with the rising cost of living and the countless investment options available. However, a ULIP plan (Unit Linked Insurance Plan) outshines other investments when saving for financial goals.
A ULIP policy offers the dual benefit of investment and a life cover to ensure that your child can achieve their dreams even in your absence. A ULIP plan can help you build a corpus for your child's education to help them achieve their aspirations. A few ULIP child plans also come with the waiver of premium option to ensure financial security in the event of the policyholder's sudden demise.
Numerous ULIP investment policies acknowledge financial goals for parents. To ensure you choose the best ULIP, it is essential to analyse the top-performing ULIP funds. You can even compare different policies and calculate your ULIP plan returns by using a ULIP calculator.
What is a ULIP Policy?
A ULIP plan is a hybrid financial product that combines investments with a life cover. When you purchase a ULIP, you need to make regular premium payments. This premium is used to provide a life insurance cover, while some is invested in funds that are either equity-oriented, debt-oriented, or a combination of both. With an analysis of your financial commitments and risk portfolio, you can choose the amount you want to invest, as well as the funds where you want to invest. To maximise your ULIP plan returns, it is ideal to start early. In addition, a ULIP policy allows flexibility to switch between funds acknowledging changing financial needs at different stages of life.
ULIP Investment as a Child Plan
A parent’s most crucial financial goal is to design an elaborate savings plan to secure their child's future. Parents must consider their child's educational aspirations, especially for funding their higher education. If you consider educational inflation in the last few years, an engineering course with a tuition fee of Rs. 16 lacs will cost Rs. 40 lacs in the next 10 years. Hence, you should start planning for your child’s higher education as early as possible.
However, choosing from the plethora of saving schemes in India can be confusing and therefore discouraging. A ULIP plan can be a great first step in such a scenario. A ULIP is essentially a savings plan that helps instil the discipline of investing. As the most basic ULIP policy comes with a five-year lock-in period, ULIPs work progressively towards wealth creation. They can facilitate the creation of a sizeable corpus to deal with the problem of constant inflation.
As the ULIP investment grows progressively, it ensures that the child does not fall short of corpus to achieve their dreams. Planning ahead of time and investing in top-performing ULIP funds in the long term can minimise stress and help you spend quality time with your little one.
A child also brings in many financial responsibilities that need immediate attention, and that can sometimes make you put the long-term financial requirements on the backseat. However, ULIP plans have now become an affordable investment option with no premium allocation and policy administration ULIP plan charges.
Additionally, policyholders can enjoy ULIP returns tax-free along with exemptions on premiums paid towards keeping the policy active (up to Rs. 1.5 lacs per annum) under Section 10D and Section 80C, respectively, of the Indian Income Tax Act, 1961. Although you should be aware of the latest taxation policies on ULIPs bought on or after Feb 1st, 2021, which make the maturity amount taxable as capital gains if the yearly premiums exceed Rs. 2.5 lacs.
Benefits of ULIP Policies as Child Plans
When it comes to planning the future for your child, you will want to ensure that you buy the best ULIP in India. There is often a misconception that the best ULIP will be expensive and will require a significant investment amount to be effective. However, to maximise your ULIP plan returns, you need not invest a considerable amount but start early with your investments. It can help your corpus grow significantly through the power of compounding, which happens when the returns from your investments are re-invested to generate further returns. This can be really beneficial, especially if you have a long investment horizon. Additionally, the benefit of having ULIP returns tax-free is another feature that helps you save more and gain more from your ULIP policy.
Several unique features make ULIPs the best savings plan to secure your child's future:
- Waiver of Premium Benefit: In the case of the policyholder's death, the sum assured is paid to the nominated beneficiary while the insurance company pays the due premium for the remaining policy term.
- Investment in a Diverse Portfolio: ULIPs come with the ability to invest in a diverse portfolio and maximise your capital appreciation to build a bright future for your child. Additionally, the flexibility to switch between funds ensures that you are invested in top-performing ULIP funds. By indicating your investment preference, the option of auto fund rebalancing ensures that your investments are unaffected by market movements.
- Corpus for Child's Education: As a ULIP child plan is specifically designed to help achieve long-term financial goals, it can help you build a bright and fruitful future for your child without any stress or financial burden in the future.
- Partial Withdrawal: If you wish to encourage your child to pursue their talent and need some funds, the ULIP savings plan allows the option of partial withdrawal basis the policy terms. These withdrawals can be made after the mandatory 5-year lock-in period ends.
- The insurance company pays the future premiums on the parent's death.
- A monthly income is provided to the family to fund the child's education.
- The family also receives a lump sum payout to meet the daily expenses.
Edelweiss Tokio Life -Wealth Rise+ helps you secure your child's financial future. The plan comes with a host of benefits, such as the Little Star benefit option to ensure that your child achieves their dreams even in your absence; the ability to diversify investment strategies to maximize ULIP plan returns, and easy liquidity and top-up premium options to customise your investments.
Invest in your child's future with ULIPs from Edelweiss Tokio Life Insurance now so that you can watch them achieve their dreams without worrying about finances.
Siddhant Dubey - Writer & Photographer
Siddhant works as a freelance content writer who is interested in a wide range of spheres from photography and personal finance to cooking. He is also an aspiring photographer striving to showcase life around him through his vision.