The Buyt Desk
ULIP is a financial vehicle that is both an insurance and investment portfolio. It is considered to be a good financial instrument that can help accumulate funds for children’s higher education and retirement planning.
What is ULIP Plan?
ULIP is an abbreviation of Unit Linked Insurance Plan. It is a multi-faceted life insurance product. It is a life insurance and investment combination. A policyholder needs to make regular premium payments just like any other insurance plan. A part premium is utilized to provide life insurance coverage and the rest is pooled with the assets accumulated from other policyholders. This pooled amount is invested in financial instruments such as equity and debt just like mutual funds. ULIP provides you with financial security against emergencies and grows your money as well.
What are the benefits of investing in ULIPs?
ULIP needs you to make small investments and get larger returns as your small fractions of money grow into a lump sum. This is the magic of compounding. There are ULIPs designed just to cater to your child’s education. As per your requirements, you can withdraw the amount partially. ULIP comes with tax benefits as an added advantage.
What are the Eligibility Criteria for Child ULIP?
You are allowed to invest in Child ULIP plans only when you fulfill the criteria of minimum and maximum requirements for age. Each policy specifies the age range for the investor which must fall in the range at the policy’s maturity.
What documents are needed for a ULIP application?
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A proposal or application for insurance.
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Age proof
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KYC documents like – Identity proof, address proof, etc.
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Other Documents
The Insurance Company can ask for additional information or documents based on
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the amount of coverage applied
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the premium that you will be paying
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your profile, your lifestyle, habits, family history, etc.
Investments in child ULIPs
Nowadays, parenting is not easy and it comes with huge responsibilities. Financial management is one big task as you need to secure your child’s future. Child ULIP helps you with this as it has several benefits like life insurance, building corpus, death cover, and others. On the demise of the parent or guardian, your future premiums are waived off and the insurance company continues to invest this money on your behalf.
Maturity benefits from child ULIP plans –
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the assured sum goes to the parent or guardian
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on the demise of the parent or guardian, the assured sum is handed over to the child
Portfolio switching between debt and equity is also possible in ULIPs. Partially withdrawals are allowed before maturity but you will lose a portion of your returns. They have a lock-in period of 5 years from the starting date of the ULIP. After this period, the policy can be surrendered and expenses like stamp duty, maintaining, and issuing the policy will be deducted by the insurance company.
Investing in ULIP for long-term expenditures
Human life expectancy is increasing with advancing medical science and so is the non-earning period of an individual’s life. So everyone needs to plan for their retirement. ULIP is designed for goal-based planning and investment can be done accordingly. ULIP plans can be brought to fulfill specific financial goals. The lock-in period makes investors disciplined and encourages investors to systematically creation of wealth for the desired financial goals.
Advantage of ULIP
ULIP allows an investor to switch between debt and equity funds. This can be done based on an investor’s risk appetite. Based on the extent of risk the investor can take in the market and his/her long-term financial goals, investments can be made in debt or equity funds or a combination of both. Experts advise for a long-term investment period, investors can take more risks at the start by investing in an equity fund, and then switch to debt funds when nearing maturity. This way of managing the portfolio is known as ‘Years to Maturity’ based portfolio management. This way you can build a good corpus for both the child’s future (education, marriage, healthcare) and your retirement.
