Becoming a parent is a wonderful experience. Besides getting to experience a whole set of new feelings, there is also the added responsibility of taking care of another human being. In these times, when inflation in various sectors is on the rise, you cannot afford to leave your family with no financial protection. That is why you must invest in a well-designed child investment plan. These plans are designed for new parents, keeping in mind the needs of a growing child. The maturity duration of these plans can be around 18-30 years; by the time your child grows up and is ready to take major decisions in their life, they have the financial backup to do so. Investing in a ULIP plan is an effective way of securing your child’s financial future. Wondering how that is so? Let us explain.
What are ULIP plans?
Let us first understand how ULIP plans work. ULIPs provide two essential financial services: they offer life insurance coverage and invest your money in financial instruments. These instruments can be linked to the market, and hence, a bit risky. Or they can also be risk-free instruments. One can select the right instruments as per their risk appetite. Balanced funds are also available. The variety offered by the different types of ULIP funds makes it an appealing investment option for all sorts of investors.
How ULIPs are ideal for your child’s financial security
Life insurance coverage provides future security
As a parent, you may be concerned about your child’s future if anything were to happen to you. Securing a hefty sum of money can relieve some of these worries as you become assured that your child will not suffer from any financial difficulties. The life insurance section of a ULIP policy provides you with this relief while also allowing your wealth to grow. If the ULIP policyholder passes away during the tenure of the policy under the conditions covered by it, the beneficiaries receive a heavy sum assured amount.
This sum assured amount from the ULIP plan can be provided via a lump sum payment or in instalments. Regardless of the pay-out option you choose, your child receives a financial backup which gives them the confidence to pursue their dreams even in your absence.
Riders provide additional coverage
If you are buying a ULIP for your child, then you should buy certain riders that can level up your financial planning. You can opt for the waiver of premium rider. The rider makes the insurer liable to waive off all the future premiums of the policy if the policyholder suffers from a covered illness, a disability, or passes away. The policy continues to function and grow your wealth even when your loved ones are not able to pay any premiums. The insurer pays the premiums on behalf of the policyholder. At maturity, your loved ones can enjoy the benefits of the accumulated returns from the ULIP plans.
Other riders, such as critical illness insurance, an accidental permanent disability rider, the family income benefit rider, and so on, can also be very helpful.
High returns are expected at maturity
Your child may want to pursue their higher education abroad or they may want to start a small enterprise of their own. You can give them the financial head start for their dreams with the high returns from ULIP plans. The best way to achieve good returns is to keep your money invested for the long term. You should buy a ULIP plan as early as possible. Keeping your money parked for the long term helps it ride over market volatility and ensure steady growth.
ULIPs are also perfect for long-term wealth creation because they allow you to switch funds as per your needs. You can switch your funds from debt to equity and vice versa by reaching out to your insurer and informing them of your plans.
Partial withdrawals help with short-term goals
Once the lock-in period of a ULIP is over, the investor can withdraw certain amounts periodically. These amounts can help you meet your family’s immediate needs, such as children’s yearly school fees, a family vacation, and so on. What’s more, these withdrawals are tax-exempted as long as the conditions are met.
Before you invest in the various types of ULIP plans, ensure to read the terms and conditions of the policy. Securing your child’s future is immensely important and you must make prudent decisions while doing so.
