As a parent, there is never a moment when you are not looking out for your child – from the time your child enters the world to the time they become adults equipped to look after themselves. A wholesome journey for a child includes access to a good education, a bucketful of travel experiences, an enjoyable and successful career, a happy marriage – and a milieu of other privileges. To ensure that your child sails through the different stages of life, it is vital to have adequate finances. While your income might be enough to get them their early years of life, you might need a lot more to pay off the rising costs of education, healthcare, travel, etc. Here is when investing in a savings plan – like a ULIP, can help you out.
How does a ULIP plan work?
A Unit-Linked Insurance Plan (ULIP plan) gives you the dual benefit of growing your income/earnings and getting whole life insurance. Under it, you invest definite sums (called premiums) every month, half-year, or a year with an insurance company. A part of those premiums is then invested in market-linked investment avenues in the equity and debt market, which then give you systematic returns/ profits at periodic intervals. These returns are generally high and range between 8% 16% per year, depending on the market’s performance and the various online ULIP plans in India.
Moreover, you can choose which asset classes to invest in or leave the responsibility of doing so to the insurer. For this, the insurer might charge you some amount, among other ULIP plan charges such as ULIP fund management charges, administration fees, mortality costs, etc.
The remaining part of the premiums goes into giving you adequate life insurance. The life insurance protection ensures your family members remain financially secure in your absence and receive monetary support in the form of a death benefit on your unfortunate demise.
You also get tax benefits with a ULIP plan wherein the premiums paid by you are exempt from tax deductions if they are below ₹1,50,000 in a year (as per Section 80C of the Income Tax Act, 1961).
How will a savings/ ULIP plan secure your child’s future?
A ULIP is one of the best money savings plans that give increased profits and help support your loved ones with periodic payouts. That way, you can align them with different milestones of your child’s life. You get to choose how to pay the premiums – whether that is in monthly or annual instalments.
You also get to decide how and when to receive the payments, whether that is in the form of a lump-sum, or lump-sum plus monthly payouts, or simply monthly payouts. As the term of whole life ULIP plans ranges from 10-20 years, you have to start investing early, preferably when your child is 4 or 5 years old. They come with a 5-year lock-in period, after which you withdraw from it. However, it is best to not withdraw from a ULIP policy as the benefits you reap are vast.
With ULIPs, you can:
1. Build a sizeable fund for your child’s future goals:
One of the best features of ULIP plans is that they help you build a sizeable fund for your child, so you have enough to rely on for providing for various phases of their life. As you can make systematic withdrawals after the 5th and 10th year of the ULIP policy, you can align those payments with life goals such as:
- Paying for your child’s high school, college, or degree college/higher university education
- Settling their medical expenses in case of a physical or mental illness
- Sponsoring their travel and holiday costs
- Saving up enough for their marriage/ wedding functions
2. Negate inflation and get the current value of money:
Not only do ULIPs work as the best savings plan with high returns, but they also fight inflation. By giving returns that are in line with the changing prices of goods and services, they ensure that your money does not remain idle and grows with time. Moreover, some of the popular ULIP policies, such as the ULIP plan of Edelweiss Tokio, come with monthly premium payment options, ensuring you stay safe from erratic market fluctuations. That way, you can set aside a small sum from your income instead of paying a big chunk annually. You even get the freedom to switch between funds/asset classes multiple times according to your risk appetite and preferences. You can also use a ULIP calculator to get an idea of how much coverage you are eligible to receive with your current income and the premiums you need to pay.
3. Continue to receive benefits for your child after your demise:
Good ULIP plans ensure that your child continues to receive the financial support it deserves even in your absence. By giving a death benefit on your demise as per your wishes, it leaves enough for your family to get back on their feet. Moreover, the best ULIP plans shall continue to give your child the benefits enlisted under it without requiring the payment of premiums by your surviving spouse.
4. Choose to retire early and have enough time to spend with your child:
A good ULIP or savings plan also lets you retire early and spend your golden years without stress. With the ULIP plan of Edelweiss Tokio, you can choose to receive payouts from the 10th year of the ULIP policy in periodic and systematic instalments from a portion of your fund. The rest of the fund value remains intact. You can retire early, enjoy a relaxed and stress-free life and spend your precious time being more involved in your child’s life.
To sum it up:
Bringing up your child simply based on your monthly earnings will not be enough in the long run. Your child deserves the best – and a ULIP plan can help you give them the best.