Once you have a child, your entire life revolves around them, including your financial aspects. You will consider your child’s present and future before making any important decision. When making any financial decisions, think about their impact on your child. Life insurance is also a decision that directly affects your loved ones, especially your child. With several types of life insurance, it isn’t easy to narrow your choices. If you want life insurance and an opportunity to invest in a single plan, you can choose a Unit Linked Insurance Plan (ULIP).
Offers dual benefits
ULIP, unlike pure life insurance, is a type of life insurance that also offers an investment component. When you pay premiums for your ULIP, they are partly used for providing you with a life cover and somewhat invested in funds of your choice. When you buy a ULIP, your child’s future is secure with life insurance and investment returns. You will get a maturity amount when your plan matures. The amount comprises the investments you made and the returns you earned. If, in an unfortunate circumstance, you lose your life, the life insurance aspect of your plan will provide you with financial cover. Ensure that the financial cover suffices for your child’s needs. To ensure that the investment and the life insurance components are sufficient for your child’s future, you can use a ULIP calculator to estimate your needs.
Allows free partial withdrawals
With a child, several urgent and un-called expenses come up. One of the unique ULIP benefits is that you get free partial withdrawals. Free partial withdrawals ensure that you have funds you can access anytime you want. Other investment products require you to pay charges or completely dissolve your instrument. The free partial withdrawal can be availed only after the lock-in period, which is of five years.
Potential for providing high returns
Traditional investments, like fixed deposits (FDs) and recurring deposits (RDs), provide nominal returns. The returns are so low that they often cannot beat rising inflation. Investors have sought new investment options like ULIPs instead of getting high returns. ULIP allows several investments into funds that you can choose based on your risk appetite—at the same time, planning your child’s future, special funds that align with your goal accordingly. The funds you pick from can be broadly divided into three types: equity, balanced, and debt. Equity funds are the ones that have high returns but come at high risk. At the same time, debt funds come with low risk and have lower returns than equity. You can invest in a balanced fund with a moderate risk appetite. You get average returns in such funds as your money is invested in debt and equity funds. You can use a ULIP calculator to estimate your returns on your chosen allocation.
When you invest in financial investment, your asset allocation is fixed from the time you invested till your investment matures. The revised budget can lead to a loss of returns for market-linked investments. If you have invested in a ULIP, your assets are much more flexible. It allows you to switch your fund allocation anytime you want. It will enable you to change your fund allocation over the years based on the risk appetite and the market’s overall performance. Your ULIP benefits are multiplied with this feature as it allows you to make the most of market fluctuations.
Several tax benefits
When you invest, keeping in mind your child’s future, the tax implication of investment is a major factor to consider. When you buy a ULIP, you get tax benefits on several levels. You get deductions on the premiums you pay for your plan under Section 80C of the Income Tax Act. The maturity amount is also subjected to tax exemptions depending on your asset allocation. The life cover the nominee receives in case of her demise is also completely exempt from taxes under Section 10 (10D) of the Income Tax Act.