There is an interesting Japanese proverb about raising children, "It only takes two to bring them to life, but it takes a whole village to raise one." This proverb summarizes the effort needed to prepare children to stand in the world. Education being the most crucial aspect of your children’s development, you would only want the best for them.
However, the rising cost of education in India has made this dream a difficult one. Here’s why: Management degree from IIM-Ahmedabad that costs Rs 21 lakhs today, is likely to increase to Rs 95 lakhs by the year 2025 (due to rising education inflation). Similarly, an engineering course that costs Rs 8-10 lakhs is probably going to cost Rs 17-20 lakhs in the next eight years.
Thus, parents are finding it hard to meet the educational expenses, be it primary, secondary or higher education.
To fund your child’s higher education, you need a robust plan that can guard against the rising inflation. Moreover, a good way to do so is by purchasing a great ULIP child plan in India that offers adequate features of investment as well as insurance in a single-vehicle. Here’s how it can help take care of your child’s higher education or other goals:
1. Maturity Benefit: To meet the College Expenses of your child
Any career that your child selects, be it a known stream (architect, lawyer, doctor or engineer) or a unique one (data scientist, marine biologist, artificial intelligence and so on), the adequate ULIP child plan in India will help meet the education expenses. All you need to do is start investing in such a plan at an early age, and allow your portfolio to grow and gather a huge amount at the time of maturity. This amount will not only take care of the higher education needs of your child but can also be used to meet goals like your child’s marriage or to set up his business.
2. Support for your child's education fees in your absence
In case of your demise, generally the insurance company pays a certain percentage of the sum assured immediately, and periodic annual payouts are paid each year until the end of the policy tenure. These payouts help take care of your child's school fees in your absence.
3. Availability of Partial Withdrawals: Helps to Enhance Your Child's Talent
Child plans not just cater to higher education expenses. These plans also offer partial withdrawal options to take care of your child’s talents too. If your child possesses a unique talent (instrument playing or singing) or needs funds for enhancing his skills (like learning a new programming language), you can nurture the same by making partial withdrawals from your child insurance plan.
Other features of child insurance policy:
Life Cover: The life cover that comes with the insurance protection part of the child plan, can be opted depending on your financial capabilities and needs.
Waiver of Premium: Upon the demise of the policyholder, the nominee gets a lump sum benefit, but the policy does not end. There is a waiver of the future premiums, and the insurers continue investing the money on behalf of the policyholder.
Tax Benefits: Child insurance plans offer not only returns and protection but also tax exemption under section 80C (life insurance) and section 80D (critical illness riders).
Investing in child insurance plan based on your risk profile:
Child insurance plans offer a wide range of fund options that you can invest in. You can categorize these funds into low-risk funds, medium-risk funds, and high-risk funds.
1. Looking for aggressive growth?
If you are investing for the long-term and need aggressive returns, taking exposure to equity is an excellent option to get some decent returns. While debt is safe, when it comes to beating the surging inflation, equity is a good bet.
2. Want to take a moderate risk?
If you are ready to take some amount of risk and yet want stability and balance in your portfolio, putting your money in both equity and debt is the right option for you (balanced funds). On the other hand, if you are a safe player, debt funds may be the right option, to begin with.
The Good News is: You have Switching Options
ULIPs provide a variety of options to manage your returns due to fluctuations in the markets. The fund switching option is one such feature by which you can manage your returns.
For instance, if you foresee a downturn in the stock market, you can switch a portion of your fund to debt/liquid funds. You can switch it back to equity once the market picks up again and then leverage the upswing.
Similarly, when you are approaching a significant milestone in life (child’s education or marriage), or your ULIP policy moves towards maturity, you can move a maximum portion of the required amount of your investment to debt/liquid funds (at the appropriate time). It will ensure that a large corpus of your investment is secure and can guarantee good returns at the time of maturity.
It is vital that you carry out the fund switching exercise based on your risk profile, your financial goals and volatility of the market.
Nothing can substitute your physical presence, but even if you are no more or lose your job due to permanent disability, your child can continue with his studies, thanks to the child insurance plan. So, make sure that your child receives an uninterrupted education regardless of your presence or absence by purchasing a great ULIP child plan in India.