Let’s start by getting a fair understanding of what ULIP as a product is before jumping to its benefits. ULIP stands for Unit Linked Insurance Plan, an insurance-cum-investment product. A ULIP plan offers dual benefits of insurance coverage along with returns from the investment. A portion of your monthly premium goes towards equity investment and the remaining amount goes towards your insurance cover. ULIP plans returns from equity are then given to the policyholder at maturity.
Alongside happiness, there are additional responsibilities that come when you become a parent- securing your child’s future, planning for their education, wedding, etc. There’s also the need to create a retirement corpus for your post-retirement life. Thus, planning your finances becomes crucial to enjoying financial freedom. One asset class for that is a ULIP plan.
You become eligible for these plans as soon as your child is born. You should ideally start a ULIP at this point to have a large sum once your child turns 18. The compounding effect works in the long term only, and it should start early. There are multiple types of ULIP giving you a plethora of options to plan your child’s future. This is what makes a ULIP-based child plan an ideal investment avenue.
Benefits of Unit Linked Insurance Plans
The benefits of investing in any type of ULIP are as follows:
- The foremost advantage is that the insurer will take care of the premium payments if something unexpected happens to the policyholder.
- In such a tragic scenario, a monthly amount as income is also provided to the family of the policyholder. This is done to ensure the continued education of the child. Thus, ULIP plans returns are vital in such a policy.
- The insured amount is given to the family of the policyholder if he or she has kicked the bucket.
- On the taxation front, ULIPs offer deductions under Section 80C of the Income Tax Act on the premiums paid in a financial year.
Some ULIP plans are not gender-specific. They offer the flexibility of early withdrawal, which means you can withdraw the amount invested after a minimum of five years. You can also close the policy after five years of starting it with no penalty or closure charges. Another feature that makes ULIP plans returns decent is that there is no ceiling on the amount of deposit you can make in a year.
Avoiding Debt Trap with ULIPs
There are many situations in life that demand a sudden outflow of cash. You are forced to take loans from friends or banks to sail through such a crisis. This loan comes at the cost of interest, and the interest pay-out is large as interest rates are high. You will end up paying a higher amount than what you borrowed initially. However, if you have any of the multiple types of ULIP, you won’t have to stress in such unforeseen situations. ULIP returns can take care of your financial emergencies. Look up the historical performances of ULIP plans to know more.
ULIPs are good plans for risk-averse investors looking to get some exposure in stock markets. Your insurance coverage is taken care of along with the investment in markets that is generating returns for you. If you are sceptical of taking a direct position in stock markets via shares or mutual funds, then a ULIP plan is your go-to investment product.
Conclusion
This is all we had for you in this edition of securing your child’s future with an insurance plus investment asset class. We hope you get a fair idea of what ULIPs are, types of ULIPs, how it is beneficial for you and your child’s future.
The bottom line is that ULIPs are not risky and give you returns apart from the maturity amount. It will help you in the long term in ensuring a decent education and life for your child. You will not have to save every penny to secure your child’s future, just pay a monthly premium for this insurance product and enjoy the ULIP plans returns.