LIC’S NEW CHILDREN’S MONEY BACK PLAN (UIN: 512N296V01) : NOT A GOOD INVESTMENT OPTION FOR CHILD FUTURE NEEDS ?

Introduction:-

The Child plans offered by any insurers usually allow you to plan for your children’s education needs in the coming years while also providing a risk cover on your life. If you are the parent, unexpectedly pass away, the child’s future is secured by way of the proceeds from the claim. With this motto Life Insurance Corporation of India launched the product. The risk coverage of child In case the age at entry of the Life Assured is less than 8 years, the risk under this plan will commence either one day before the completion of 2 years from the date commencement of policy or one day before the policy anniversary coinciding with or immediately following the completion of 8 years of age, whichever is earlier. For those aged 8 years or more, risk will commence immediately. The proposer needs to take premium waiver rider so that their risk also will be covered under this plan and unfortunate death of the proposer all future premiums will be waived off and benefits will release timely.

Benefits:-

Death: On death of the Life Assured before the stipulated Date of Maturity provided the policy is in full force, then on death of the Life Assured before the date of commencement of risk: Return of premium/s excluding taxes, extra premium and rider premium, if any.

On death after the date of commencement of risk: Death benefit, defined as sum of “Sum Assured on Death” and vested Simple Reversionary Bonuses and Final Additional Bonus, if any, shall be payable. Where “Sum Assured on Death” is defined as Higher of 10 times of annualized premium or Absolute amount Assured to be paid on Death i.e. Basic Sum Assured.

Survival: On the Life Assured surviving the policy anniversary coinciding with or immediately following the completion of ages 18 years, 20 years and 22 years, 20% of the Basic Sum Assured on each occasion shall be payable, provided the policy is in full force.

Maturity: On the Life assured surviving the stipulated date of maturity, provided the policy is in full force, Sum Assured on Maturity ( which is 40% of the Basic Sum Assured) along with vested Simple Reversionary Bonuses and Final Additional Bonus, if any, shall be payable.

Participation in Profits: The policy shall participate in profits of the Corporation and shall be entitled to receive Simple Reversionary Bonuses declared as per the experience of the Corporation, provided the policy is in full force. Final Additional Bonus may also be declared under the policy in the year when the policy results into a claim either by death or maturity.

Eligibility Parameters:-

a) Minimum Basic Sum Assured : Rs. 100,000

b) Maximum Basic Sum Assured : No Limit (The Basic Sum Assured shall be in multiples of Rs. 10,000/-)

c) Minimum Age at entry for Life Assured : [0] years (last birthday)

d) Maximum Age at entry for Life Assured : [12] years (last birthday)

e) Minimum/ Maximum Maturity Age for : [25] years (last birthday) Life Assured f) Policy Term/Premium Paying Term : [25 – Age at entry] years  

Rebate:-

Mode Rebate: Yearly mode - 2% of Tabular Premium

Half-yearly mode - 1% of Tabular premium Quarterly, Monthly,

SSS - NIL High Sum Assured Rebate: Basic Sum Assured (B.S.A) Rebate (Rs.) 1,00,000 to 1,90,000 Nil 2,00,000 to 4,90,000 2 per thousand B.S.A. 5,00,000 and above 3 per thousand B.S.A.

Loan: Loan can be availed under the policy.

Our Views:-

To add to this, the features of the plan are friendly to the investor. One, most insurance companies give a premium waiver benefit on children’s plans so that the child can continue to enjoy plan benefits even if an untoward event happens to the parent. In this scheme also offers life cover for the child and requires you to pay additional premium for your own life cover. Two, availing of the rider carries conditions too. The plan specifies that if the child is below eight years, there will be a waiting period for the death cover. Further, the plan’s returns are also quite low and it is hard fact about life insurance you can except returns like other available venues of investment. The benefit illustration estimates the net return at maturity at about four per cent, assuming a gross return of 8 per cent but actual return in between 4 to 6% that will become nothing looking to the present values of money. If you have a 10- or 15-year term in mind, a combination of a pure term cover for the parent plus an investment in balanced funds will be a much better way to build wealth for your child. If you are a conservative parent with a girl child, you may also look at the Sukanya Samriddhi scheme or else consider the PPF.