Child ULIP Insurance Plan

If you raise a 5-year-old today, education costs will be substantially greater in 10-15 years due to the typical inflation rate. Given this, you would want to put together a good child plan that will cover such expenses in the future. The same is true for your child's wedding expenses, home-buying costs, start-up costs, future day-to-day expenses until their earnings begin, and so on.

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Best Child Saving Plans
  • Insurer pays your premiums in your absence

  • Invest ₹10k/month and your child gets ₹1 Cr tax free*

  • Save upto ₹46,800 in tax under Section 80(C)

*All savings are provided by the insurer as per the IRDAI approved insurance plan. Standard T&C Apply

Nothing Is More Important Than Securing Your Child's Future

Invest ₹10k/month your child will get ₹1 Cr Tax Free*

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A ULIP plan will help you build a corpus for your child by the time they are in their late teenage years. 

What is Child ULIP Insurance Plans?

A ULIP plan is a type of financial instrument that combines investments and life insurance into one package. When you buy a ULIP, you must pay premiums monthly. A portion of the premium is used to provide life insurance coverage. In contrast, the rest is invested in either equity-oriented, debt-oriented, or a combination of the two, which can be used to fund your child's education, marriage, and other future expenses. You as a policyholder have to decide how much and where to invest based on an appraisal of your financial commitments and risk portfolio. 

It is best to begin your ULIP plan early to maximize your child's corpus. A ULIP policy gives you the freedom to choose between funds as your financial needs change during your life.

Types of ULIPs are classified according to the following broad criteria:

  • Equity Funds: Premium paid is invested in the stock market, posing a higher risk.

  • Balanced Funds: The premium paid is split evenly between the debt and equity markets to reduce the risk for investors.

  • Debt Funds: These funds invest the premium in debt securities, which have a lower risk and a lower return.

What are the Features and Benefits of Child ULIP Insurance Plans?

ULIPs are the finest savings plan for your child's future because of several unique features:

  • Waiver of Premium Benefit: The promised sum is paid to the specified beneficiary in the event of the policyholder's death. In contrast, the insurance company pays the due premium for the remaining policy term.

  • Investment in a Diverse Portfolio: ULIPs allow you to diversify your portfolio and maximize your capital appreciation to help your child build a bright future. Furthermore, the ability to swap between funds ensures that you are investing in the best-performing ULIPs. The feature of auto fund rebalancing ensures that your assets are unaffected by market movements by specifying your investing preferences.

  • Corpus for the Education of Children: A ULIP plan helps you construct a bright and prosperous future for your child without any stress or financial pressure because it is specifically designed to help you reach long-term financial goals.

  • Partial Withdrawal: If you want to help your child pursue their passion but do not have enough money, the ULIP savings plan allows partial withdrawals based on the policy terms.

  • Finance Long-Term Objectives: Since you have long-term goals of giving your child the best education possible, a ULIP is a smart investment option because the money is compounded. So, net returns are higher, and you won't have to worry about money at the right junction.

  • Benefits from Income Taxes: Few people know that the premium paid for a ULIP qualifies for a Section 80C tax deduction. In addition, under Section 10(10D) of the Income-tax Act, the returns from the policy upon maturity are tax-free. Thus, this coverage has a dual benefit that you can take advantage of. (*Tax benefit is subject to changes in tax laws.)

When Should You Buy a Child ULIP Insurance Plan?

Any time is a good opportunity to invest in your child's future. ULIPs are designed to help you weather market volatility, so you should invest in them when the markets are down or up. It's best to get started early.

Unfortunately, there is a common misperception that the best ULIP is expensive and requires a significant investment to be effective. However, you do not need to invest a significant sum in maximizing your ULIP plan profits. Instead, you should begin investing early. Furthermore, having tax-free ULIP returns is another perk that allows you to save more and gain more from your ULIP policy. (*Tax benefit is subject to changes in tax laws.)

How to Choose a Child ULIP Insurance Plan?

Step 1: Conduct market research and compile a list of all ULIP products available from various vendors.

Step 2: Learn about the benefits of each ULIP product's life insurance and investment profile.

Step 3: Select a package that aligns with your investing and insurance needs.

Step 4: Inquire about the product in depth with your insurer, either online or in-person, at the insurance office.

Step 5: If you are satisfied, go ahead and buy the ULIP from the insurer.

What are the Factors to be Considered Before Investing in Child ULIP Plans?

Before investing in ULIPs, assess the following crucial considerations:

  • Personal Financial Goals: It is crucial to identify your personal financial goals before investing in a ULIP for your child. It will help you find the most suitable plan for you and will help you build wealth and save money for retirement.

  • Compare ULIP Plans: The next step is to analyze the ULIP products in the market once you have set your financial objective and the type of ULIP that will help you reach it. Look for comparison in the form of hidden costs, premium payments, and ULIP performance, among other things.
    Also, look into the kind of funds the ULIP invests in to see what kind of returns you may expect from your investment. Comparing plans will help you analyze which plan promises to meet your requirements in the best way possible. 

  • Risk Factor: It is important to consider the risk factor before investing in a ULIP. If you have a low-risk appetite, you should invest in a conservative plan, in which a higher portion will be invested in debt securities. If you have a high-risk appetite, you can go ahead with the aggressive investment approach, in which a higher portion is invested in equities.

  • Investment Horizon: ULIPs have a 5-year lock-in period. If you relinquish a ULIP within the first three years, your insurance coverage will expire immediately. On the other hand, you will only get a refund of the surrender value after three years.

In Conclusion

ULIP-based child plans have become a popular way to invest in a child's future, giving several benefits. You can invest your surplus and get assured of safeguarding your child's future by securing a corpus for their future goals. Also, it provides secure insurance coverage as if something happens to you, so your children are not left with financial struggles.

FAQ's

  • In a ULIP, what is the fund value?

    Ans. Depending on their risk profile and market conditions, each insurer invests in one of the numerous funds. The fund value is the total monetary value of the units owned by the insurer. You calculate the fund value on a given day by multiplying each unit's net asset value (NAV) by the number of units the insurer holds on that day. As a result, the fund's value fluctuates depending on the NAV.
  • What is the ULIP sum assured?

    Ans. The minimum guaranteed amount granted by ULIP to the nominee in the event of the policyholder's death is known as the sum assured.
  • Which is the superior option? Is it better to invest in a ULIP or a mutual fund?

    Ans.
    • Mutual funds are strictly an investment product, whereas ULIPs are a combination of investment and insurance products.
    • Mutual funds can be withdrawn at any time, whereas ULIPs have a five-year lock-in period.
    • In the case of ULIPs, switching between funds is possible without paying any taxes. You can swap between mutual fund plans if they are from the same fund house. However, such a transfer will be treated as a redemption, and the accompanying capital gains will be taxable.
    • Mortality, premium allocation, fund management, and administrative charges all apply to ULIPs. When it comes to mutual funds, there is no such thing as an entry load. However, annual fund management fees and exit loads may apply.
  • Which organizations are responsible for issuing Child ULIP insurance?

    Ans. Child ULIP products are often offered to customers by public and private sector insurance carriers who operate alone or partner with international insurance companies. However, the Reserve Bank of India (RBI) and the Insurance Regulatory and Development Authority of India (IRDAI) must approve ULIP products before any insurance carriers may sell them.

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