Whether it is to save for your child’s education, marriage, or other financial goals, a good investment plan is all you need to secure your children’s future. Due to their dual benefits, Unit-Linked Insurance Plans (ULIPs) are flexible and versatile options. They offer life insurance cover, along with wealth accumulation through strategic investments.
A ULIP is a market-linked programme that combines investment and insurance into one convenient plan. A capital market-linked plan, or ULIP, allows investors to engage in either stock or debt, depending on their risk appetite. As a result, ULIP can be a good way to protect your child’s future.
However, is a ULIP enough to save up for your children’s future expenses? Let’s take a look.
Whole Life Protection
You can get life insurance cover up to 100 years of age and also include your spouse and children in the plan. A plan like Edelweiss Tokio Life Wealth Secure+ allows you to start with as little as ₹1,000 per month. This means in case of any unfortunate situation, your children will receive the death benefit to meet their financial needs.
With the option to invest in both equity and debt instruments, you have the potential to accumulate wealth for future purposes. You can track the performance of these funds, too. switching between funds might be taxable for funds bought after February 2021. Market-linked returns offer you the chance to build a corpus to meet future expenses like college admissions, helping your child start a new venture and more.
Free Partial Withdrawal
If you need emergency funds for your child, you can partially withdraw from the ULIP when the 5-year lock-in period ends. This amount is tax-exempted.
ULIPs can help in tax optimisation, allowing you to save more for your children. However, after Budget 2021, ULIPs will be subject to capital gains tax when the aggregate premium paid towards it in a year exceeds ₹2.5 lakhs. Plans bought on or after February 1, 2021, will be taxable on the maturity amount too.
Premium Waiver Benefits
Certain plans offer premium waivers in the event of your untimely demise within a certain period. In such a situation, the sum assured will be paid out to your child (nominee), and the remaining premium shall be paid by the insurance company on your behalf. Moreover, the maturity amount will be paid to your child at the end of the policy tenure. You can also choose to opt for a premium waiver rider.
In this era of uncertainty, ULIPs can offer enhanced financial protection for your children through the triple advantages of tax savings, wealth generation, and life insurance cover. Check the performance of funds and invest as per your risk appetite. Make sure you are aware of all the terms and conditions to make an informed decision.