Every parent dreams of providing the best education for their children. Especially in a country like India, where education is given paramount importance in most families. This becomes one of the most important aspects of parenthood. However, one may also note that as the years have passed, the cost of good education has only risen.
To reach this goal, the first thing one needs to understand is that the financial planning needs to start early. And in this post, we will look at how Unit Linked Insurance Plans can become the financial instrument to make your child’s education dream a reality.
What is ULIP?
Before we get into the details, lets first understand what a Unit Linked Insurance Plan is. It is a market-linked product that offers the dual benefit of an investment and a life insurance risk cover. Here, the policyholder pays a premium amount either monthly or annually. Out of this premium amount, a small amount of the premium goes towards a life insurance cover and the rest is invested in market instruments like stocks, bonds or funds (equity, debt or a hybrid).
What is a ULIP Child Plan?
A child plan works similar to a normal ULIP policy but is customized in such a way that it provides added benefits and features to ensure that your child gets the right financial support to fulfill his/her dreams with or without you being around. These benefits include a life cover, tax benefits and complete flexibility to invest in the funds of your choice, depending on your risk appetite and your child’s education goals.
How to Plan for your Child’s Education with ULIP Child’s Plan?
It all starts with proper research on how much amount you would require and in what year. Things to consider here would be the choice of education stream that your child may choose to take up, its current expense analysis, then understanding how the expenses have increased over time due to inflation. Based on this research, you will need to extrapolate the expense that you may require when your child reaches that particular age in the future.
This should give you a fair idea as to what kind of funds you will need at what time. This becomes your target amount. Next, you will need to determine how much time you have to accumulate/earn this amount. Suppose you have 15 years in all to reach this amount, you will need to calculate the monthly or yearly premium that you need to pay, to get there.
However, this is where the power of ULIPs can be put to use. Since you have the flexibility to choose the funds at any point in time. You can utilize market insights or keep a keen eye on market performance to determine an appropriate time to switch to a high risk & high returns fund. If you plan smartly, you can reach your goal in less amount of time with the same premium.
Benefits of ULIP Child’s Plan
- Tackle the rising education costs due inflation
- Enjoy dual benefits of investment as well as insurance
- Though small in terms of amount, your regular investments when compounded will grow into a handsome amount upon maturity
- Tax benefits under Section 80C and 10D of the Income Tax Act, 1961. Moreover, ULIPs are exempt from Long-Term Capital Gains Tax hence making them an attractive investment avenue
So why wait? Secure your child’s future and buy a unit linked insurance plan with Finserv MARKETS today!
Also read in detail about the ULIP tax benefits you can avail with investment plans available on Finserv MARKETS.
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