Every parent wants to provide the best education to their children, for which a huge corpus of funds is required. When it comes to securing your child’s future, a ULIP-based child plan is considered to be a great option, as it helps secure your child’s financial future. It helps meet future financial obligations, such as a child’s higher education, a child’s marriage, etc.
Considering the dual benefits of investments & insurance, ULIP can be a good option. The premium amount paid is diverted towards the funds opted for, & the remaining amount is allocated towards life insurance. This plan also offers an option to switch between the funds & your changing requirements.
How Does a ULIP Child Plan Work?
Provided are the steps to be followed while investing in a ULIP for child education purposes:
- Choose a desirable plan from the top child plans available in the market.
- From the options available, choose the insurance funds offered by the insurer.
- The insurance service provider will allocate part of the premium towards insurance & the remaining towards market-linked investments.
- Pay the premium amount towards the child plan throughout the policy tenure.
- On the completion of policy tenure, the insured or nominees receive a maturity benefit either in a lump sum or a deferred payout.
- The maturity benefit received will be used for the child’seducationalpurposes.
Reasons to Buy a ULIP Child Plan
Provided are the reasons to buy a ULIP child plan:
- This plan offers financial protection to those children who want to pursue higher education.
- This plan reaps maximum returns to bear the education costs when a child needs the funds, taking the inflation factor into consideration.
- This plan helps bear the cost of tuition fees if your children want to pursue higher studies.
- This plan offers financial security to children in case of the sudden demise of their parents.
Points to be considered while buying a Child ULIP Plan
Provided are the points to be considered while buying a child ULIP plan:
- Features of the Plan
Consider the policy features before buying such a tenure, payment modes, frequency of payment, etc. & choose one which best aligns with your future financial requirements.
- Risk Portfolio
Check for additional available riders & other options that will help fulfil your needs & risk tolerance level.
- Claim Settlement Ratio
Check for the claim settlement ratio of the insurance company.
- Allocation of Funds
The funds should be allocated depending on the health requirements, career objectives, life plans, marriage plans, etc.
Features of the ULIP Child Plan
Provided are the features of the best policy for child, i.e. ULIP:
- Partial Withdrawal
This plan allows the policyholders to partially withdraw the funds once the lock-in period of 5 years is completed.
- Rider Benefits
This plan offers additional riders to enhance the plan at an additional premium cost, such as:
- Accidental Death Benefit (ADB) Rider
This rider provides additional financial support to the beneficiaries if the policyholder dies in an accident.
- Accidental Total or Partial Disability (ATPD) Benefit Rider
This rider provides beneficiaries with a lump sum amount if the policyholder suffers from total or partial disability due to an accident.
- Critical Illness (CI) Rider Benefit
This rider provides the policyholder with a lump sum payment of the sum assured to bear the treatment & medical costs.
- Flexibility on Choice of PT, PPT, & Premium Payment Frequency
This plan offers flexibility in choosing the Policy term (PT) & Premium Payment Term (PPT) according to children’s financial timelines. Also, there are many options available for Premium Payment Frequency in case of ULIP Child Plans. This plan allows payment of premiums on a monthly, quarterly, half-yearly, annual, or lump-sum basis.
- Option to Safely Switch between Risk Portfolios
This plan allows a policyholder to switch between the funds, which helps an investor get higher returns while switching from a high to a low-risk portfolio.
Benefits of ULIP Child Plan
Provided are the benefits of the ULIP Child Plan:
- Build a Sufficient Corpus for Child Education
A ULIP child plan, which is linked to the market, helps build a good corpus amount that will help meet your child’s education expenses.
- Gives Higher Benefits over the Inflation Growth
The education costs inflate by 10-12% on an annual basis. Thus, equity-linked ULIP plans for children reap higher benefits than inflation rates by the time funds are required.
- Financial Support for Medical Treatment
Due to the partial withdrawal facility, ULIPs are considered to be liquid investments, as funds can be availed of anytime during emergencies.
- Collateral to Raise a Loan for Higher Education
This plan can be held as collateral in case the policyholder wants to raise a loan for higher education.
- Tax Benefits
- The premium amount paid is exempt from tax, up to a maximum of INR 1.5 lakhs per year u/s 80C.
- The interest paid on an education loan is exempt from tax for up to 8 years u/s 80E.
- The maturity amount received is exempt from tax if the aggregate amount of premiums paid does not exceed INR 2.5 lakhs.
ULIP Return Calculator
Provided are the steps to be followed while using a ULIP return calculator:
- Log in to the ULIP return calculator online, which is generally free of cost.
- Provide the premium amount as per your budget & the frequency at which payment would be made, i.e. monthly, quarterly, annually, or in a lump sum.
- Select the policy term for the Child ULIP Plan.
- Choose the desired funds in which the amount is to be invested, i.e. debts, equity, or both.
- Provide your personal details, such as gender, age, medical reports, etc.
- The ULIP return calculator will now provide the return amount that would be received over a period of time, depending on the premium & tenure of the plan.
Conclusion
ULIP for child plan offers extensive coverage to parents for securing their children’s future. With dual benefits of ULIP, a policyholder will get financial protection, taxation benefits, & wealth accumulation, which will help achieve the educational objectives of children.
