February 19, 2021

How You Can Secure Your Child’s Future with ULIP

With the changing times, the cost of raising a child becomes an expensive affair if we consider the rising education cost, extra-co-cular activities fees, tuition fees, and other expenses.

The inflating effects on education can make even the big amount of Rs 50 lakhs seem insufficient.

According to the recent survey, it is revealed that 65% of people invest 2/3rd of their monthly income on their children's education expenses.

How You Can Secure Your Child’s Future with ULIP: eAskme
How You Can Secure Your Child’s Future with ULIP: eAskme

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Every parent wants the best for their children and when it comes to education, failure is not an option. With each passing day, education expenses are becoming more expensive.

Therefore, parents need to look out the best investment option that can secure their child’s bright future.

The availability of several options offered by the insurance companies allows you to choose the best suited investment plan as per your needs and requirements.

Usually investment plans for children come with death benefits as well as maturity benefits along with the flexible terms and conditions, and investment plans.

Some plans even offer multiple modes of premium paying for the better convenience of users.

The payouts provide total coverage of the financial reserve that is required for the education of your child.

The best possible way is to list out  all the requirements and comparing of plans before the final selection of the investment plan.

It is always better to be ready for any type of financial obligations by investing in any child insurance plan like ULIP.

Let’s understand the term ULIP

ULIP- ULIP is better known as Unit Linked Insurance Plan.

It is a combination of Insurance along with investment which means you can create wealth along with life cover.

Insurance companies take a portion of your investment for life insurance and the rest is put into an equity based fund or debt for fulfilling your long-term goals be it children’s education, retirement plan or important functions.

How does ULIP work?

When you invest in ULIP, the fund managers invest part of your investment in providing insurance cover and the rest in shares.

There are fund managers who manage all the investment therefore investors are free from all the hassle of tackling the investment.

The best part about ULIPs is that you can switch your portfolio between debt and equity considering your knowledge about the market and risk appetite.

Types of ULIPs

There are several benefits of ULIPs which contribute to the popularity of this instrument.

ULIPs are categorized into 3 types-

1.    Investing Funds - There are 3 types of funds that ULIPs invest in-

a. Equity Funds-

In this the premium paid is invested in the equity market by the fund managers and is subjected to high risk.

b. Balanced Funds-

To minimize the risk, the premium paid is balanced between the debt and the equity market.

c. Debt Funds-

It carries a lower risk and the premium is invested in debt instruments and provides lower return.

2. Use of Funds-

It is important to list out all the needs and requirements for which investment has to be made. There are basically 3 types-

a. Retirement Plan-

If you are still employed and planning for your  retirement days, then this plan is made for you.

b. Child Education-

If you want to plan out  expenses for your child’s higher education,then you can invest in this plan to achieve a long term goal.

c. Wealth Creation-

If you are willing to make heavy corpus to meet various financial goals in future.

3. Death Benefits for Policyholders

a. Type 1 ULIP:

This type pays higher of the assured amount or the fund to the nominee in case of death of the policy holder.

b. Type 2 ULIP:

This type pays the assured amount and fund value to the nominee in case of the death of the policy holder.

Features of ULIP

  • ULIP allows you to get both the insurance benefits policy as well as investment in equity shares.
  • When you make an investment in ULIP, a major part is put into the investment of equities and the rest is in debt. The premium you pay is divided into insurance cover and equity shares.
  • Policy holders have the benefit to decide the funds to be invested, based on your risk appetite.
    Policyholders can easily switch between equity and debt whenever they want to.
  • ULIP basically allows 10 to 15 years of time period as the longer the investment period is, the more you can benefit from it.

Ways ULIP Can Help you Save your Child’s Future

Financial planning is very important in everyone’s life.

It helps you in meeting your future financial goal and withdrawing money from your own account incase of any emergency.

The planning becomes more crucial if your child wants to take up any specialization course overseas.

You need to consider estimation of the foreign exchange along with the inflating education cost so that you can decide  the better long term investment plan in contributing to your child’s future goal.

Here are some ways that you can consider-

  • Through an investment made to ULIPs, you can easily accumulate the wealth required to meet your child’s future goals.
  • The investment plan includes a death benefit in which your child as a beneficiary will get a lump sum amount in case of demise of the parent. In this situation, the insurer waives off all the premiums to be paid in future.
  • Also the family will get monthly income in case of the unfortunate death of the parent.
  • This investment plan offers a sum assured when the policy gets matured.
  • The ULIP plan allows investors to withdraw the entire amount in 5 years. Besides, policyholders can opt for policy closure after 5 years without any charges.
  • There is no restriction on depositing a maximum amount in a  year therefore you can save any amount.
  • According to Section 80C of the IT Act, the Policy holders can claim tax deductions of up to Rs.1.5 lakh.

The above described features about ULIP will help you understand the term better.

So, if you are planning to invest your funds to meet your child’s future goals, a ULIP plan is one best option you can go for.

It not only helps you get insurance cover but also a good amount to secure your child’s future.

If you still have any question, feel free to ask me via comments.

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