ULIP is a flexible investment plan which comes with the dual benefit of insurance & investment. When it comes to the education of the child, every parent wants to provide the best of it, & a huge corpus of funds would be required. It helps meet future financial obligations, such as a child’s higher education, a child’s marriage, etc. ULIP-based child plans help in meeting future financial obligations, such as a child’s higher education, a child’s marriage, etc.
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Importance of a ULIP Plan for Child Education
Provided are the reasons parents should consider buying a ULIP for their child’s education:
- This plan offers financial security to the child who wants to pursue their career, educational plans, etc.
- If the child wants to pursue higher education, this plan also includes the tuition fees.
- In case of the need for funds in future, this plan offers the best returns to incur educational expenses.
- In case of the sudden demise of parents, ULIP offers financial support to their children.
- ULIPs offer higher returns to accommodate future inflation rates.
- In comparison to the savings plans, the market-linked investment plans offer higher returns, but high financial risks.
Things to Remember before buying a ULIP Plan for a Child
Parents should keep in mind the following points while buying a ULIP for their children:
Policy Features
Choose a plan that considers its features, such as policy tenure, payment frequency of premiums, etc. The plan should suit the financial requirements of the family according to life milestones.
Risk Portfolio
Select the additional riders along with the insurance funding options that will fulfil the financial requirements & risk tolerance level.
Insurance Claims Settlement Possibility
Choose an insurance service provider with a high claim settlement ratio (CSR).
Careful Allocation of Funds
The investment amount & tenure must be properly assessed depending on the career objectives, healthcare requirements, marriage or any other life events.
Types of ULIP Plans for Child Education
Provided below are the different types of ULIP plans offered for child education:
Child Education ULIPs with Guaranteed Returns
Some of the ULIP plans for child education offer stable & guaranteed returns by investing in low-risk debt instruments. This plan best suits conservative investors who want growth, preservation of capital, & assured returns. A ULIP return calculator can be used to get an estimate of the maturity amount depending on the policy tenure, premium amount, & type of fund.
Equity-based Child Education ULIPs
Here, the funds are invested in equity-based funds to get higher returns in the long term. These plans best suit the investors with a high tolerance level who are willing to take risks related to market fluctuations. These funds offer high returns & the accumulation of wealth.
Balanced Child Education ULIP
These plans maintain a balance between equity &debt funds to make a diversified portfolio with greater stability. A part of the funds is allocated towards equity to achieve growth, while the remaining part of the funds is allocated towards debt funds to achieve stability. These plans best suitinvestors who can accept a moderate level of risk & potential returns.
Goal-based Child Education ULIPs
ULIP aligns the investment plan well with the investor’s goals, such as school or college tuition fees, career goals, etc. This plan offers flexibility to investors by allowing them to adjust their portfolios depending on their financial needs & the time limits of every objective.
Retirement & Education Combo ULIPs
This plan offers combined benefits for children’s education & retirement by allowing investors to invest simultaneously in education & retirement. This plan provides multiple investment choices & flexibility in payment of premiums, hence fulfilling the dual needs of the investor. This plan helps to achieve goals & hence provides a solution to long-term financial planning.
Benefits of a ULIP Child Education Plan
Provided are the benefits of the ULIP Child Education plan:
Collateral to Raise a Loan for Higher Education
These plans can also be held as collateral to raise loans for higher education.
Build a Sufficient Corpus for Child Education
This plan helps meet all the expenses related to education by building enough corpus funds.
Gives Higher Benefits over the Inflation Growth
Education-related expenditure grows 10-12% annually, but in the long run, the best equity-linked child educational ULIPs reap benefits higher than the inflation factor.
Dual Benefit
While the best policy for child may provide protection only, the ULIPs offer the dual benefit of insurance & investment, allowing wealth growth & securing a child’s future.
Financial Support for Medical Treatment
This plan offers partial withdrawal of funds, offering liquidity during medical emergencies after a lock-in period of 5 years.
Tax Benefits
- This plan offers a tax deduction on the amount of premium paid, a maximum of up to INR 1.5 lakhs per annum u/s 80C.
- Get a tax exemption on the amount of interest paid on educational loans for up to 8 years.
- If the premium paid per annum under this plan is up to INR 2.5 lakhs, the maturity proceeds thereof will be exempt from tax, except for death benefits.
Waiver of Premium benefit
In case of the sudden demise of the policyholder, the amount of the sum assured will be paid to the nominees, & the premium for the remaining period gets waived off & hence paid by the insurance company.
Corpus for Children’s Education
This plan helps to build a bright future for children, hence relieving the financial stress of the policyholder.
Dual Payouts
The amount of the sum assured is paid in case the insured dies. &, the fund value is paid at the time of plan maturity.
Investment in a Diverse Portfolio
Under this plan, the funds are invested in a diverse portfolio, which helps maximize your capital & build a brighter future for your child.
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.
