Every parent wants to impart the best educational facilities 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, such as a child’s higher education, a child’s marriage, etc. They are considered a source of fund creation, which lets you achieve taxation benefits for the policyholder. The returns on unit-linked insurance plans are market-linked, which means they offer higher returns than traditional plans.
Under ULIPs, a part of the premium is to be paid towards life insurance & the remaining towards investment. One can opt to invest in debt, equity, or both, depending upon the level of risk & your objectives, making it an ideal investment option. It provides a flexible option to switch between the funds anytime during the policy tenure. ULIP includes both investment & insurance factors, providing policyholders with dual benefits, i.e., securing their family’s financial future with financial growth.
Features of Child-based ULIPs
Provided are some of the features of child-based ULIPs:
- Investment in a Diversified Portfolio
ULIPs offer a unique benefit of letting you invest in a diversified portfolio, which includes equity to be invested in small, mid, & large-cap companies, along with debt funds. With the help of the ULIP Calculator, parents can calculate how these diversified investments will grow over a period of time & help them build a secure future for their child.
In case the funds in which investment has been made are not providing considerate returns, this plan allows you to switch between the funds from one investment to another.
- Redirection of premium & changes in sum assured
This plan also allows for modifying the premium allocation with the changing requirements of your child’s future. This feature can be availed once during a policy year. Additionally, this plan also offers an option to change the amount of sum assured starting from the 6th year, only if all premiums have been paid. Also, there is an upper limit to change the amount of sum assured within the policy tenure.
- Partial withdrawal of funds
This plan allows a partial withdrawal of funds, depending on the terms & conditions, once a lock-in period of 5 years has been met.
Once the investment choices have been mentioned, the auto fund rebalancing automatically helps you maintain the portfolio well-aligned with the changing market conditions.
This feature helps you increase your returns by moving from high-risk to low-risk funds, mainly during the last 4 years.
How Child ULIP Works?
Here is how a child-based ULIP works:
Step 1: Choosing the Most Suited Plan
A Best Policy for Child should be chosen by the parents, depending on their future financial goals, risk appetite, investment horizon, & premium paying capacity.
Step 2: Regular Premium Payments
The premium should be paid at a regular time period chosen at the time of purchase of the plan, i.e. monthly, quarterly, half-yearly, or yearly. This premium amount is then invested throughout the policy tenure to build a corpus fund for their child’s future financial requirements.
Step 3: Investment
Under this plan, a part of the premium is allocated towards market-linked funds, such as debt, equity, or balanced funds, & the remaining towards life insurance. Thus, letting parents create long-term wealth with the help of market fluctuations.
Step 4: Growth
The growth of the child ULIP is dependent on how the market performs, thus offering growth potential over a longer tenure. This makes it best suitable to meet future financial objectives, such as a child’s education or marriage.
Step 5: Maturity Benefits
The amount accumulated throughout the policy tenure is received in the form of maturity benefits at the end of the policy tenure. These corpus funds will be utilised to meet the education-related expenditures or any other needs.
Step 6: Death Benefits
Under this plan, the beneficiaries will receive the death benefits in case of the policyholder’s sudden demise, ensuring financial security for the children.
Step 7: Premium Waiver
Most of the child-based ULIPs offer a waiver of premium benefit in case of the policyholder’s sudden demise. This means that in case the policyholder dies, the policy will remain in continuation, providing parents with secure their future financial objectives.
Step 8: Flexibility
This plan offers flexibility in terms of switching between the funds depending on their risk tolerance level, market conditions, future financial obligations, etc. This means parents can optimise returns & manage risks with the help of this feature.
Step 9: Riders & Additional Benefits
This plan offers additional riders, such as critical illness cover, accident death benefit riders, etc., to enhance the coverage of the plan. This facility can be availed at an added cost, providing financial security to the family members.
Steps to Calculate Returns on Child ULIPs
Provided are the steps to calculate returns on child ULIPS:
Step 1: Log in to any available calculator online.
Step 2: Input the amount of premium along with the desirable frequency of payment, i.e. monthly, quarterly, annually, or in a lump sum.
Step 3: Decide the policy tenure.
Step 4: Next, choose the desired funds in which you choose to invest money, i.e. debt, equity, or both.
Step 5: Provide the details, such as age, medical details, gender, etc. & click “Submit”.
Step 6: Once the details are submitted, the ULIP calculator will assess the amount of returns you will receive over time.
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. These plans are designed to fulfil the children’s financial needs, such as education or marriage. It offers parents life coverage & investment options that are well-aligned with their children’s goals.