ULIP Plan for Child: A Smart Way to Secure Your Child’s Future

Every parent wants to provide the best education to their children, for which a huge corpus of funds is required. When reviewing a Best Policy for Child, ULIP can turn out to be the smartest choice. It offers different benefits according to their income & lifestyle, securing the child’s future. These plans offer financial security, tax benefits, wealth creation, etc., by combining insurance & investment, which helps parents meet their child’s educational requirements. Whether it is school fees, higher education expenses, or any extracurricular activities, this plan covers all. 

Unlike term insurance, ULIP offers a part of the premium to be paid towards life insurance & the rest 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. 

Reasons to Purchase a ULIP Plan for a Child 

Provided are the reasons to buy a ULIP plan for a child:

• This plan helps provide financial security to the child, which will help meet the educational goals.
• This plan offers higher returns, being market-linked, hence helpful in meeting the educational expenses.
• It helps meet the tuition fees in case your child wants to pursue higher studies.
• It also offers financial security to the children in case of the sudden demise of their parents.
• The high returns offered by the plan also help beat inflation.
• Due to them being market-linked, they attract high risk & hence higher returns in the longer run in comparison to the savings plan.

Things to be Considered before Buying a ULIP Plan for a Child

The following are the things to be considered before buying a ULIP for a child:

• Policy Features

While choosing a ULIP for your child, consider factors such as policy tenure, payment frequency of the premium amount, & plan features. These should align well with the financial milestones & long-term financial objectives.

• Risk Portfolio

Select the relevant riders & fund options which best suit your requirements & risk tolerance level, providing financial protection & growth.

• Insurance Claims Settlement Possibility

Carefully review & assess the company’s performance in terms of its claim settlement ratio. The insurance company with a higher claim settlement ratio should be chosen.

• Careful Allocation of Funds

Ascertain the coverage amount along with investment tenure, depending on the future requirements of your child, which will include education, health, marriage, & career-related milestones.

How Does a ULIP Plan Work for a Child?

A ULIP plan is considered the best if it serves both the purposes of insurance & investment, securing your child’s educational future. Let us discuss how a ULIP works for children with the help of the steps mentioned below:

Step 1: Assess your child’s educational objectives & then choose a plan from the most trusted insurance company that will help achieve them. 

Step 2: Depending on the level of your accepted risks, choose the type of funds, i.e. debt, equity, or balanced funds. 

Step 3: A part of the premium is allocated towards insurance, & the remaining towards investment in market-linked funds.

Step 4: Make payment towards the premium regularly, depending on the period chosen.

Step 5: Remain invested to let your funds grow depending on the market-linked performance.

Step 6: It allows for managing risks by switching between the funds.

Step 7: At the end of policy tenure, a maturity benefit will be received either as a regular payout or in a lump sum.

Step 8: These funds can be used to meet the child’s education-related expenses, such as school fees, tuition fees, higher studies, studying abroad, etc.

Eligibility Criteria

Provided are the eligibility parameters that should be met to buy a ULIP Child Education Plan:

• In the case of the policyholder, i.e. parent or guardian, the minimum age to enter the plan should be 18 years.
• In the case of the policyholder, i.e. parent or guardian, the maximum age to enter the plan should be 60 years.
• In the case of a beneficiary, i.e. a child, the minimum age to enter the plan should be 0 years.
• In the case of a beneficiary, i.e. a child, the maximum age to enter the plan should be 18 years.
• The maturity age for the policy for the child ranges between 18 & 25 years.
• The maturity age for the policy for the parent is 70 years.
• The policy tenure ranges between 10 & 30 years.
• The minimum amount of sum assured ranges from 10 times the annual premium.

Features & Benefits

Provided are the features & benefits of a ULIP for a child:

• Investment in a Diversified Portfolio

Under ULIP, you get the added advantage of diversification of funds, where you can invest your equity funds in small, mid or large-cap companies. This will result in the capital appreciation of funds, building a brighter future for your child.

• Fund Switching Option

Under this plan, you are allowed to switch between the funds in case one of the segments is not offering the desired returns.

• Premium Redirection & Modification in the Sum Assured

This plan allows the change of the allocation of funds once a year, depending on the requirements of the child. Additionally, it also allows for modifications in the amount of sum assured from the 6th year onwards.

• Partial Withdrawal of Funds

Once the lock-in period of 5 years has been completed, this plan allows for partial withdrawal of funds, if required.

• Auto Fund Rebalancing

This feature helps in the rebalancing of funds, which helps in adjusting the portfolio to protect the investment amount from market fluctuations. This helps to align the funds with the child’s future objectives.

• Safety Switch Option

These plans allow you to switch from high-risk to low-risk funds when you are near the end of the policy tenure, safeguarding the accumulated wealth over the policy tenure. A ULIP calculator can be used to ascertain the growth of your investments, ensuring the child’s future objectives are achieved.

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.