Every parent wants to give their child the best of everything. Whether it is about education or lifestyle conducive to their growth. Unit-Linked Insurance Plans (ULIPs) enable you to meet your long-term financial objectives while also providing insurance coverage to your family. A ULIP is a financial instrument that offers both insurance and investing opportunities. It allows you to invest in stock, debt, or a combination of the two. Your investment receives market-linked benefits based on your asset allocation. You can use a ULIP to build up funds for your child’s future school expenses.
But have you ever considered buying ULIP for your child? There are many ULIP-based plans available in India. By using the Ulip calculator, you will get the projected figure that will assist you in covering the expenses for your child’s education but in case of your demise, your child will get either a lump sum or recurring payments, depending on the terms of the policy. In this article, we will understand how investing in a child plan can be beneficial for your child.
What makes the ULIP plan preferable for your child?
ULIP child plan are among the most popular plans due to their dual benefits: they provide good market-linked returns while also providing financial protection to your family through life insurance. To put it simply, a ULIP is both an investment and a life insurance policy. Some ULIP-based child plan have the option of waiving premiums in the event of a policyholder’s unexpected death. In other words, your child will get regular funds to support their schooling expenses.
Can help you cover the cost of education: Every parent wants their child to receive the best education possible, whether at a reputable national educational institution or a prominent international university. However, funding for these reputable educational institutions cannot be done only through savings. To pay for college, you will need a large sum of money. Aside from tuition and living expenses, you must consider education inflation and foreign exchange rate fluctuations. Making an early investment in a Child-based ULIP will help you save enough money for your child’s education. Before investing in the same, use the ulip calculator to understand how much you will be able to get from your child plan.
ULIP can assist you in satisfying the child’s immediate and future financial needs: A ULIP also serves as a life insurance policy, guaranteeing that your child’s financial needs are addressed in the event of an unforeseen occurrence. If your child is in the middle of an educational programme, there will be no shortage of finances in case you pass away. Even a child’s life stage goals, such as marriage, can be paid by the ULIP’s death/disability benefit, which takes the form of a sum assured. Some ULIPs also offer for premium waivers in the event of your death or disability. This means that the policy’s benefits remain in effect, and the insurance company will cover all future premiums. In this instance, the fund’s value will be paid at maturity.
Features and Benefits of Child-Based ULIPs
Ulip child plan comes with the following features and benefits:
Investment in a diversified portfolio: ULIPs offer the unique benefit of investing your funds in a diverse portfolio that includes equity investments in small, mid and big-cap companies. This will allow for optimum financial appreciation, resulting in a prosperous future for your child.
Fund switching option: What if your fund’s investment in a specific section does not produce the required returns? ULIPs allow you to swap your funds from one investment to another based on the policy rules written on the document.
Tax Benefits: ULIPs provide tax benefits under Section 80C of the Income Tax Act. Parents can claim a deduction of up to INR 1.5 lakhs for the premium paid into a ULIP child plan. Proceeds received on surrender/partial withdrawal/maturity of a ULIP plan are tax deductible subject to the limitations outlined in Section 10(10D), namely that the premium due for any of the years during the policy term does not exceed 10% of the death sum assured.
In addition, for policies issued after February 1st, 2021, a tax exemption on maturity proceeds will be granted provided the premium paid in any of the years for such matured plans does not exceed Rs.2,50,000. Exemption under Section 10(10D) will be given only for matured policies whose aggregate premium in any year does not exceed Rs. 2,50,000. Income from the remaining policies that exceed the specified maximum will be charged as capital gains.
Premium redirection and change in the sum assured: You can adjust future premium allocations to meet your child’s changing requirements. Typically, this is permitted once each insurance year and is applicable thereafter. If you want to increase or lower the sum assured in your policy, you can do so from the sixth policy year onwards, as long as all of your premiums have been paid. The maximum number of changes to the sum assured throughout a policy term is limited.
Partial withdrawal of cash: What if you suddenly need finances for your child? ULIPs also offer the option of partial withdrawal, which allows you to withdraw a minimum and maximum amount based on the policy terms, typically beginning with the sixth policy year.
Auto fund rebalancing: Once you’ve specified your investing preferences, the option of auto fund rebalancing ensures that your investments are unaffected by market fluctuations.
Safety switch option: You may use this to increase your earnings. You can change your investments from high-risk to low-risk funds in a systematic manner, often during the policy’s final four years.
At last,
ULIPs are an excellent investment choice for parents looking to plan for their children’s education. ULIPs combine insurance coverage and investing options, allowing you to fulfil your financial goals for your child’s future. ULIPs are long-term investments, so plan and invest early to protect your child’s education. With the correct ULIP plan, you can be confident that you are investing in your child’s future and preparing them for a prosperous and joyful life. Before buying one, use the Ulip calculator to see for how long you should stay invested and the amount to be invested to get the desired returns.
