ULIPs are one of the wealth creation plans that you can use to create security for your child as well as keep their future safe even if you were not around for them anymore. Let’s understand what ULIP is and how you can use it as a child plan.
ULIPs as a child plan
Unit-linked Insurance Plans, better known as ULIPs, are plans offering life insurance alongside wealth creation. When you buy a plan, you usually pay regular premiums for the same. These premiums are then divided into two parts. While one of these is directed towards building your life assured, the other is directed towards market-linked investments.
The first feature, life insurance, offers you a way to create financial security for the future of your loved ones. In the event of an unforeseen circumstance, your nominee can claim a death benefit from the policy. This allows them to face the future without worrying about any financial obligations.
The second feature, investments, allows you to build a financially secure future for yourself as well as your loved ones. Since these are market-linked wealth creation opportunities, there is scope for you to optimise your plans in a way that optimise your returns and reduces your risk. Investment plans allow you to build your wealth for long-term goals.
But how can ULIPs be a child plan? When you invest in a ULIP, you will be expecting either of the two benefits – death benefit or maturity benefit. You are also required to nominate a person to be able to claim and receive the death benefit if such a situation were to arise. In this case, if you want your ULIP policy to benefit your child, you can choose to nominate them. You may be required to assign an appointee, who will manage the claim process on behalf of your little one if your child is a minor.
On the other hand, if you were to receive the survival benefits of the policy, you can choose to pass them on to your child or use the money to fulfil their dreams. In either case, you can start a ULIP as an investment in your child’s future.
If a ULIP is your way to secure your little one’s future and achieve their dreams, it is ideal to buy such a policy in the early years of your child’s life. You can even buy them within the first few months of their birth. These plans are known to work best in the long term. Hence, it is best to buy them as early as possible. This allows you to maintain the policy for a longer duration and aim to receive the benefits by the time you are required to fulfil goals like your child’s higher education or their wedding.
When buying a ULIP, it is advisable to compare plans. One plan may differ from another slightly. and comparing them allows you to choose what suits you best. It is also advisable to use a ULIP calculator to see how much premium you will need to pay for the sum assured you like.
Benefits of using ULIPs as child plans
Here are a few of the benefits of using a Unit-linked Insurance Plan as a plan for your child’s future.
While there are some major milestones in a child’s growth journey that a parent may expect, there are some occasions that may arise unforeseen and leave the parent in need of financial support. For such occasions, ULIPs allow partial withdrawals. You can withdraw a small yet significant amount after the lock-in period and before plan maturity to fulfil any emergency needs.
In the event of the death claim being made and paid out, the policy premium waiver benefit will kick in. This will allow the nominee to forfeit the remainder of the premium amount. Check with your insurance provider whether your policy allows for a premium waiver benefit.
ULIPs can prove to be a suitable option for you if you are a parent looking to create comprehensive future security for your child. Start by understanding what ULIP is, browsing for plans, and using a ULIP calculator to see which plans and sum assured suit you best.