Are ULIPs the right choice for a 30-year-old juggling parenthood & future child planning?

As a 30-year-old Hyderabad resident married for two years, I've been considering investing in ULIPs, especially with the upcoming addition of my baby to the family by the middle of this year. Following the suggestion of my colleague, who is already investing in ULIPs for retirement, I'm seeking expert advice on whether ULIPs are a profitable and secure investment option for securing my child's future. What key details should I be aware of before making an investment in ULIPs?

Reply by Vivek Jain, Head - Investments, Policybazaar.com

Considering financial strategies proactively, even before the birth of your child, shows astute foresight on your part. You are right to seek financial security in a dual-benefit product like ULIP (unit-linked insurance plan). As you navigate the responsibilities that come with expanding your household, you should bear in mind that your investment should be able to provide you with good returns as well as a secure safety net for the future. ULIPs are a viable option that fulfil both these conditions by being a unique combination of insurance and investment, offering the potential for wealth creation over the long term. What distinguishes them from other investment avenues is their capability to provide protection beyond the policyholder's lifetime, making them particularly attractive to parents. These plans are eligible for tax deductions up to Rs 1.5 lakh under Section 80C due to the life insurance element.

In addition to life insurance coverage, these plans include a notable optional feature called Waiver of Premium, that ensures the continuity of the investment plan without causing financial strain on the family. Upon the demise of a policyholder, families may often encounter difficulties in sustaining premium payments for investment plans. The inclusion of the Waiver of Premium option comes to their rescue in such situations, as it entails the insurance company assuming the responsibility of paying the premium on behalf of the deceased policyholder. This option guarantees the continuity of the investment plan, safeguarding the financial future of the child while relieving the family from additional financial responsibilities.

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Coming to your question on what you should be mindful of before making this decision, I would like to advise you to carefully gauge your risk appetite and tolerance before investing. Also, seek a financial advisor’s expertise, if needed, to understand the nature of returns and also the market risks involved.

(Views expressed by the investment expert are his/her own. E-mail us your investment queries at  askmoneytoday@intoday.com. We will get your queries answered by our panel of experts.)