Becoming a parent is the most wonderful feeling in the world! You become responsible not just for yourself, but for the other life who depends upon you for almost everything. Right from when they are little, you are consumed by thoughts of improving their lives and fulfilling their goals. From extracurricular activities to honing vocational talent and pursuing the best academic routes, there is no shortage of things you need to help them achieve. But all of this requires a certain level of foresight and financial assistance. The overall child-rearing expenses from birth to age 21 for a middle-class family are predicted to be extremely expensive. This is where forward-thinking insurance and investment plans like ULIPs come in handy.

A child plan or child insurance plan is any Guaranteed Returns Plan (endowment or money-back plan) or Unit Linked Insurance Plan (ULIP) that helps you save a certain sum of money for your child. The savings aspect ensures that you build funds over the long term and get good returns on your investment. You can easily pre-define the stages when you would need these returns, such as when your child enters high school, goes to college or marries. The life insurance aspect ensures that your child’s finances are taken care of by the built-in life cover in case of your unfortunate demise.

 According to a recent survey by Life Insurance Council in Delhi, “61% parents believe life insurance assists in children’s education & marriage expenses”. Child-centric insurance plans are financial tools that help you plan a secure future for your child. It makes sure that financial insecurities do not come between your child and their dreams, even when you’re not around.

How Does a Child Plan Work?

One of the best options for a child’s plan is a ULIP. In a money-back plan, the child gets a lump-sum survival benefit at regular intervals. These plans are helpful for people who need a lump sum amount at a certain time in the future. However, these plans do not offer significant returns. Hence, they might not be able to offset the impact of inflation, especially if you need the money for education expenses. But a ULIP, on the other hand, provides the policyholder a return on their investment throughout the policy duration, making it a better option to prepare for future financial goals.

Secondly, a ULIP plan is an investment and insurance plan that provides a secure life cover along with investment opportunities in different market-linked securities such as bonds and funds. The investment made is as per your life stage, risk-appetite and financial objectives. In case of the demise of the parent, the child gets a lump sum amount. Moreover, all future premiums for the policy will be waived.

Thirdly, an endowment policy is a plan where you receive a lump sum along with bonuses. These plans are useful as they help create a savings fund for higher education expenses, etc. However, returns on a ULIP are not guaranteed as they can be higher based on market conditions. Also, with a ULIP you have the flexibility of switching between your funds, and choosing the best strategy based on market conditions to get maximum returns.

Benefits Of A ULIP For Your Child’s Education

 Getting a degree from the best educational institute requires a strong financial plan. The IIM Ahmedabad course fee has risen by four times in the last decade, crossing the Rs 20-25 lakh mark. The tuition fee for an undergraduate engineering student at IIT today (in 2022) is Rs 2-3 lakh per annum.  An MBBS degree from a private college now costs about Rs 25-30 lakh. So, if you want your child to graduate from a premium institution, then you need to be financially well-off or, you must save systematically to pay for the classes.

A ULIP plan is a combination of investment and insurance. It will help them focus on their career without worrying about finances, even in your absence. The returns would be sufficient to help your child meet his future needs. For example, if you were to invest INR 5000 per month for 10 years, you would receive a payout of INR 16.15 lakhs at the end of 20 years with a ULIP like Edelweiss Tokio Life’s Wealth Secure+. Thus, you should keep these future projections in mind as you decide your premium amount. The more you invest, the healthier returns you will see in the future.

When it comes to your child’s education, it is a important to start saving as early as possible. You could save up little by little every month and build a fund over the long-term. Alternatively, you could start saving with a ULIP plan with which you can choose to get returns at important stages of your child’s life.

8 Tips to Buy the Best Child Education + Insurance Plan

01 : Start Early – Even though we have Education Loans to our rescue, self – funding your little one’s aspirations is always a better idea and surely makes you a proud parent. Also, not to forget the high interest rates on education loans and credits that makes it difficult both financially and mentally. It is recommended to grow your corpus of savings to reduce the amount of credit you need, which will in turn reduce your interest rate and tenure.

02 : Factor Inflation – Monthly premiums for child plans such as Edelweiss Tokio Life – Wealth Secure+ start with as low as Rs.1000 per month. But before you decide how much to invest in your child education plan, consider the changing economic factors. Hence, while investing in a child plan, it is important to calculate the fund you wish to accumulate keeping inflation in mind. Considering 5% – 8% as the rate of inflation is a fairly accurate place to start. This will give you a good idea of the kind of tuition you will have to pay for in the future, when your child is ready for higher education.

03 : Waiver of Premium Benefit – Most online child education plans offer either an in-built or an optional Waiver of Premium Benefit. This rider is important to be opted for while buying a child education plan. This is because in case of an untimely death of an earning parent, the future / remaining premiums payable to keep the policy going, are waived off without any changes in the benefits of the child plan taken during maturity.

04 : Joint Life Cover – Choose a child plan that provides a joint life cover to you and your spouse. This ensures that even in the case of an unfortunate demise of one parent, the child’s future is still secure as the other parent will still be insured. Edelweiss Tokio Life – Wealth Secure+ is one such ULIP child plan that gives the option of choosing a joint life and joint life + child plan option.

05 : Systematic / Partial Withdrawals – It is a good idea to invest in a child education plan which has an option of either systematic or partial withdrawals during the policy term. This will give you the flexibility of meeting any unplanned expenses or medical emergencies where you may be forced to seek financial help.

06 : Choice of Funds – Basis your risk-appetite and a considerable time for investment, (at least 10 years), you should consider investing in more of the equity or market-linked funds v/s secured funds. It is suggested to stay invested in equity when the markets are bearish and move to a debt / secured fund, when the markets are volatile. This is in case of a self-managed portfolio. You also have an option to buy a child plan where the units are managed by the company’s fund managers, to bring you the best returns.

07 : Switching & Premium Redirection – This option allows you to switch between funds or redirect remaining premiums to other funds basis the stock market condition.

08 : Zero or Low Charges: While choosing a child plan, you should consider the various charges such as policy administration charge, premium allocation charge, mortality charge etc. that are associated with various life insurance plan.

Having an insurance and investment plan like ULIP is the best gift you can give to your child. Higher education is expensive, and the last thing you would want as a parent is to let the financial situation come in the way of fulfilling their dreams and aspirations. Timely investing in an insurance and investment plan that also provides tax benefits on premiums paid, is the right thing to do!