25th February 2021
Finance

ULIP Plan Will Help You to Secure Your Child’s Future

For several investors, the primary goal is to build a corpus for the future to meet the child’s expenses. Although there are many child investment plans, many people prefer investing in ULIPs. Read on to know more about how you can secure your child’s future with ULIPs.

Becoming a parent could be one of the most important events you may experience in your life. Not only does it bring the immense joy of being a parent, but it is also a life-changing experience. Suddenly, you would find yourself responsible for you and your little one. As you get ready to embark on the journey of parenthood, you would want to ensure that you are sufficiently prepared for the inevitable financial changes.

Over the years, in the purview of the rising inflation, apart from the usual lifestyle expenses, education, medical costs have increased significantly. The best way to deal with the current and future child’s expenses is to start preparing now and invest in ULIP. Let’s see how you can secure your child’s health with the ULIP plan

When you are looking to invest for your child’s future, you would want to create a cushion of protection for your family from the uncertain circumstances that you may face in the future. And, in the event of your unfortunate and untimely demise, or loss of income, these investments can help you protect your child’s education and, by extension, their future.

Remember, ULIP is primarily an insurance product, and it comes with a lock-in period of five years, which you can extend. This implies that it is a long-term investment product and enables you to develop the habit of steady saving. You can save a small amount regularly towards your child’s future and let your savings grow.  

Since ULIPs allow you to get exposure to investment in equity funds and other equity-oriented investment instruments, many experts recommend people to start investing at an early age. You should start investing in ULIPs as soon as you decide to have a child. This is because historical data suggests that the equities provide better returns in the long-run. So, the earlier you start, the longer duration you will have to allow your savings to grow.

Another significant way the ULIP plan can help you secure your child’s future is through its switch funds feature. Most ULIP providers in India give the policyholders flexibility to switch their funds four times in a year without levying any additional charges. This is an excellent feature because it allows you to change your investment strategy. Let us understand this with an example.

Initially, you may want your child to pursue MBA in India, which would cost you about 10-15 lakhs, and you would invest accordingly. But, as your child grows, he may have different aspirations or knowing their skill levels, you would want him/her to pursue engineering overseas, which may cost you about 20-30 lakhs or more.

Thus, you can switch your investment from debt funds to equity funds, which has higher growth potential. Not to mention, your child may want to get married, which would add to your expenses. Typically, Indian marriage costs at least 5-10 lakhs. Thus, by switching your funds, you can align the investments to get the expected final payout after maturity.

Apart from the regular ULIP plan, you can also consider investing in a ULIP-based child investment plan that provides triple benefits. First, under these plans, in the event of your untimely demise before the end of the investment term, the future premiums are borne by the insurer. This means, even in your absence, your child’s financial future will be secure. Second, such ULIP plans provide a monthly income to the family to fund the child’s education. Lastly, the insurers pay a lump sum amount upon the policyholder’s demise to help the family meet their regular expenses.

Final Word

Thus, investment in ULIP is a sure-fire way to safeguard your child’s financial future. It helps you take care of their future expenses, even in your absence.