ULIP plans are great investment plans that can have assured life insurance and high maturity benefits. Each year their capability to provide high returns attracts several investors who wish to accumulate funds for a future occasion.
But if you were wondering if these plans are suitable for saving money for a child’s future, you are right. To know how they can act as a good investment plan for a child, you must first learn ULIP’s meaning, its importance as a child investment plan and its major benefits.
What is ULIP?
ULIP or Unit Linked Insurance Plan, is a securities investment plan and a life insurance policy. Through it, an investor gets the dual benefits of high investment returns and assured life insurance. The ULIP plan invests the premium payments as capital in some market securities such as equity, stocks, mutual funds, or even direct investment. And at the time of plan maturity, they return the capital with the yields.
What is ULIP’s Meaning in a Child Investment Plan?
Regular life insurance did not have any return on investment, and even if it did, it didn’t sum much. Because of these low interest returns, people only saw life insurance as a guaranteed savings tool. But since the arrival of ULIP plans, they have always shown high returns and great potential as an investment plan. So, ULIP meaning was synonymous with investment plans, and people started investing in them for various personal and financial business requirements.
But when it came to investing in a child plan, ULIP’s meaning caused a lot of traction. There are several risks associated with ULIP plans that are not safe for an important investment plan, such as child plans. And because no one wants to gamble on the funds meant for their child’s future, they maintained distance.
But a ULIP is similar to any market dependent investment plan you choose for children. Some of the most likeable child investment plans include shares, equity, mutual funds, gold, assets, and property. All of these have the same risk factor as seen in ULIP. But ULIP is the only one capable of doubling the investment in a short span of five years.
Nowadays, insurers also provide a lower limit on interest rates below which the interest rate will never go during the entire policy term. And they also provide funds with low risks factors. All these add up to provide the investor with a reliable investment option, which they can even use for their child’s future.
Benefits of ULIP Investment Plans for Children
To further understand ULIP’s meaning as an investment plan, you must also go through its benefits. It will help you realise the direct outcomes and savings you can get from a ULIP plan, which is not seen in any other plan. Below are some of the benefits that investors get from investing in ULIPs for their children.
Flexible-Premium and Payment Frequency
ULIP provide flexible premium and payment frequency, so the investment in your child’s future doesn’t affect their present life. So, you can still set aside money for the basic requirements.
Tax Savings
ULIPs also provide the same tax savings as life insurance. And you can get the maximum savings while investing in child plans. However, please note that tax benefits are in accordance to the current tax laws that are subject to change from time to time.
High Returns from a Long-term Investment
As these plans are for children, investors start investing in them early. Due to this, the term increases to ten years or more. Such long terms can help ULIP returns gain more value over time.
Partial Withdrawal
The partial withdrawals in ULIP that are subject to a few conditions help the investor get liquidity in emergencies.
A More Disciplined Systematic Investment Plan
As the premium payments to ULIPs are more strict, the investor develops a more disciplined approach to the plan.
Knowing ULIP’s meaning, its importance as a child investment plan and the direct benefits will help you consider them an option to invest for your child’s future. To further increase your trust in them, you can try investing in ULIP plans from honourable insurance providers.
