Unit Linked Child Plan And Its Benefits

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It is said that parenthood is the best phase in an adult’s life. Becoming a mother and/or father is considered a blessing. It is every parents’ responsibility to secure their child/children’s present and future, safeguarding their life. Keeping this in mind, the insurers in India have come out with plans that would aid the parents in securing and safeguarding the lives of their children such as the Unit Linked Child Plans. Under the Unit Linked Child Plans, the child is eligible to receive a return on investment as well as death benefits. This secures the child’s future in the event of his and/or her parents’ unfortunate death.

A Unit Linked Child Plan is similar to the regular Unit Linked Insurance Policy (ULIP) when it comes to the part of the insurance premium being used to cover death risks and other charges under the policy such as mortality charges, fund management charges, administrative charges, etc. and the remaining premium amount is invested in financial instruments that would give good return on investments such as shares, equity funds, etc.

Unit Linked Child Plans come with a number of benefits for children, a few among them are:

• Return on investment benefits

Unit Linked Child Plan offers a number of investments options where a part of the insurance premium can be invested to get good returns. The options range from debt to balanced funds or equity to debt funds. The parent who has availed the policy for his/her child can make investment decisions after assessing all the risks involved. Funds that involve high risks such as equity offer high/good returns on investments, even though the returns are subject to market risks. Investments in debt-related funds are less risky, and even though the return on investment won’t be high, the policyholder will receive stable returns. As per the market conditions, the insured can switch the investment funds.

• Death benefits

A death benefit is what makes a Unit Linked Child Plan different from the regular Unit Linked Insurance Policy. Under a Unit Linked Child Plan, in the event of the parent’s (policyholder’s) death, the policy nominee will receive the claim amount as a death benefit without the plan getting expired. The plan will continue as per the set policy guidelines and will pay the complete fund value at the time of the plan’s maturity.

• Plan maturity benefits

Compared to other child plans or term insurance plans, the Unit Linked Child Plans are linked to market and the plan continues even after the death of the parent (policyholder). Even after excluding higher policy charges such as fund management charges, mortality charges, etc., the returns on investments are considerably high and the policyholder can opt for the nominee to receive the policy maturity benefits in fixed installments or in lump sum as a one-time benefit.

• Switching of funds

The Unit Linked Child Plans offer the policyholder with the option to switch between different funds four times in a year. This feature is offered to the policyholder to receive maximum return on investment without charging anything extra. Any switches made beyond 4 times will be charged an additional fee of Rs.100 every time the switch is made.

• Waiver of future premiums

Under the Unit Linked Child Plans, when the death of the parents occur, the remaining insurance premium that needs to be paid will be waived off. On behalf of the deceased policyholder, the insurer will take investment decisions and keep investing in various funds. When the policy matures, the nominee will receive the fund value after deducting the necessary charges as agreed at the time of policy inception.

• Surrendering the plan

In case the insured wishes to surrender the policy, he/she can do so anytime, but the benefits under the plan will only be applicable after a specific period. This period can vary between 3 years and 5 years, depending on the insurer and the plan availed. The number of years for which the insurance premium has been paid, also determines the specific period.

In case the insured is interested in withdrawing the plan partially, it is possible, provided the policy has successfully completed 3 years and subject to the policy terms and conditions.

Unit Linked Child Plan is a vital tool that helps the parents safeguard their children and secure their lives regardless of whether or not the parents are alive. Availing a Unit Linked Child Plan will also prove to be the best investment for the insured as well as his/her children. This smart plan should be availed from a good insurer after comparing all the available plans in the market.