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ULIPs to Secure Childs Future

    IndianMoney.com Research Team | Monday, November 24,2014, 05:37 PM
 

You are the sole breadwinner of the family and rising expenses eat up most of your savings. Providing your child a good education is your main duty to your children and no doubt you are saving up for this.

With inflation eating up the value of most of your savings and expenses rising, managing the family budget is quite a difficult task. God forbid what if something happened to you? How would your children get a quality education?

You must secure child's future with a child ulip plan.

child ulip

What are child ulip plans?

A child Ulip works in the same way as a Ulip.
A child Ulip has twin benefits :

Insurance + Investments
The child ulip can be taken by you (parent), your spouse or even your parents (child’s grandparents) as the proposer of the policy.

The child ulip is taken on the proposer’s life (You/Spouse/Child’s grandparents) and he/she becomes the life assured under the policy.

If you are the life assured of the child ulip plan, on your death a lump sum is provided to your child (or the guardian) for your child’s education.

what are child ulip plans

How does a child ulip work?

You and a number of investors invest in a child ulip. The Insurer (life Insurance Company) pools this money together after deducting all applicable charges for life insurance and other costs.

The remaining amount is invested in equity, debt or a mix of both (equity + debt) depending on your preference. A fund manager is appointed by the Insurer to manage this investment and give you a good return.

The amount invested by you and other investors is divided into units (smaller parts) and you get units in proportion to the investment you have made.

Lock in period

The child Ulip has a lock in of 5 years. (You must stay invested for five years).

Charges

Premium allocation charges, mortality charges, fund management charges, policy administration charges and surrender charges are the same as those charged in ulips.

These are deducted from the premiums you pay.

What is the minimum sum assured/death benefit you get in a child ulip Policy?

If you invest in a child ulip when you (life assured) are below 45 years of age the minimum sum assured (death benefit paid to your child) is 10 times the annualized premium (10 times the premium you pay annually).

If you invest in a child ulip when you (life assured) are above 45 years of age the minimum sum assured (death benefit paid to your child) is 7 times the annualized premium (7 times the premium you pay annually).

The death benefit at any time within the plan cannot be less than 105% of the total premiums you pay.

What is a child ulip with a waiver of premium rider?

how do child ulip plans work

You have to pay the premiums in a child ulip plan until the maturity of the plan or for a fixed period.

If you (life assured) die before the maturity of the plan, the child ulip pays your child (or his guardian) the death benefits (sum assured).

What makes a child ulip plan with a waiver of premium rider unique is on your (life assured) death, all future premiums are paid by the Insurer (Life Insurance Company).

On maturity of the plan (when your child is 18-25 years of age) the child gets a maturity amount which is the fund value of the plan.

The child ulip policy makes payments twice :

  • On your (life assured) death the sum assured is paid.
  • On the maturity of the policy the fund value is paid.

What are the features of a child ulip plan?

The child ulip plan has a minimum sum assured of INR 1-2 Lakhs. There is no upper limit you can pay as a premium (invest in the plan).

What should be the age of your child when you (life assured) invest in a child ulip plan?

The minimum age you (life assured) can invest in a child ulip plan is when your child is 1-90 days.

The maximum age you (life assured) can invest in a child ulip plan is when your child is 12 years.

The child ulip plan matures when the child is 18-25 years of age depending on when you invest in the policy.

At what age can you (life assured) invest in a child ulip plan?

You (life assured) can invest in the child ulip plan when you are 18-20 years (minimum age you can enter this plan).

The maximum age you (life assured) can invest in a child ulip plan is when you are 50-60 years.

Your maximum age at the maturity of the plan is 65-70 years.

What are the tax benefits of child ulip plans?

  • You get a deduction under Section 80C of the Income tax act up to INR 1.5 Lakhs per year on your taxable salary for the premiums you pay for the child ulip.
  • The maturity amount you get when the child ulip matures or the death benefit your child gets on your (life assured) death are tax free under Section 10(10d) of the income tax act.

You have learnt from this article how a child ulip with a premium benefit rider helps your child secure a good education.

IndianMoney.com Research Team

The research team at IndianMoney.com comprises of certified and experienced professionals who share the company's vision to make every Indian financially literate by equipping every Indian with right and unbiased advice. IndianMoney.com research team provides newsletters, articles, videos and FAQs on various financial products and concepts only to help you make wise financial decisions.

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