A ULIP investment plan can be highly beneficial towards meeting your future targets in terms of wealth creation, retirement planning, and other family goals. One of these goals could be the higher education of your children. A ULIP may help you fund the same while combating inflation successfully. How is this possible? Here is a brief look at how ULIPs work and how you can use them to your advantage.
ULIPs and Funding your Children’s Educational Costs
Funding the higher education of your children is certainly possible with ULIPs. Here are some points worth remembering:
- ULIPs offer both life coverage and investments in market-linked funds for earning returns
- In case of your untimely demise within the policy period, your child will receive the sum assured or fund value, whichever is higher. Hence, for such contingencies, this provision will suffice to cover some of the higher education costs of your child.
- Depending on your risk appetite and future goal, you can choose the funds to invest in. You can allocate more to either debt or equity funds in this case. You can periodically switch funds to earn more if the market conditions are ripe for the same or safeguard your fund value in bearish market conditions.
- You also get ULIP tax benefits, which include deductions up to Rs. 1.5 lakh under Section 80C on premium payments and exemptions on the death benefits under Section 10 (10D). The maturity proceeds can be tax-exempt, too, depending on certain conditions.
- You can scale up your returns and reduce risks by investing in a diversified fund portfolio comprising small-cap, large-cap, and mid-cap equity funds along with debt funds to balance out the risks. Thus, you can benefit significantly from the power of compounding to build a sizable corpus for your child’s education.
- You can also top-up your premium to increase your fund value and buy more units. You can also modify or redirect premiums along with increasing or reducing the sum assured of the policy. This is usually allowed subject to certain conditions.
- You can also partially withdraw your funds after the lock-in period, depending on the initial expenditure that you have to meet for your child’s higher education
- You can choose professional fund management in order to tap into the expertise of seasoned professionals or go for automatic fund rebalancing to ensure that your investments can ride out market fluctuations
These are some of the ways in which ULIPs can help you fund the higher education of your children. However, there are some other aspects that you should always keep in mind. These include the following:
- The minimum lock-in period is five years. Hence, invest only if you can afford to stick around for the long haul. ULIPs usually deliver the best returns after 10-15 years. Starting early is the key towards reaping the rewards of your investment.
- Pay your premiums on or before their due dates in order to keep your policy active and avoid lapses
- Make sure that you choose your funds after taking professional advice and assessing your financial goals. Your risk appetite and life stage should determine the fund selection in this case.
Hence, a ULIP investment plan can turn out to be a saviour in terms of covering your child’s higher education costs while surpassing inflation comfortably over the long haul. After all, as a parent, you will want nothing but the best educational opportunities for your child. Hence, start early to build a good corpus for this purpose.