This is a child unit linked insurance plan (Ulip) by IDBI Federal Life Insurance Co. Ltd. Ulips are transparent investment products that invest your money in the market and also provide some insurance.
WHAT DO YOU GET?
This is a type II plan—on death of policyholder, nominee will get both the sum assured and the fund value. So, the child who is also the nominee will get the sum assured immediately upon death of the policyholder. Subsequently, the insurer waives all future premiums and invests that money as a lump sum on behalf of the deceased (most child Ulips invest the premium as and when it accrues and not as a lump sum). On maturity, the beneficiary gets the fund value.
As insurance, sum assured is fixed at 10 times annual premium, or half of the policy term multiplied by the annual premium, whichever is higher, if the policyholder is younger than 45 years of age. For those older, sum assured is 10 times the annual premium or quarter of the policy term multiplied by the annual premium, whichever is higher. This is applicable only if the premium payment term is eight years or more.
Regulations mandate a minimum death benefit of 105% of all premiums paid till date. So, if the death benefit (sum assured plus future premiums) is less than 105%, the insurer will pay the difference. For investments, there are nine funds, including three asset allocator funds. There is also a systematic allocator option, that starts with an equity heavy portfolio and moves to being debt heavy near maturity.
WHAT’S SPECIAL?
In one option, on death of policyholder, the investment automatically moves from an active fund to the systematic allocator option. Also, one can tailor maturity benefits to be given in instalments. The policy credits a loyalty addition—3% of average fund value in the last 36 months at the end of the 10th year, and subsequently at the end of every five years.
WHAT DOES IT COST?
The premium allocation charge is 3.15% of the first-year premium and nil subsequently. Policy administration charge is 6.30% of the annual premium for the first five years, and is charged on a monthly basis from the fund value. Thereafter, this is 3.15% per annum. Fund management charge is fixed at 1.35% of the fund value for all funds. Mortality charge is based on age, term and sum assured.
Over a 21-year horizon, assuming a 35-year-old man takes a policy with Rs.95,000 as premium, for a sum assured of Rs.9.98 lakh, the maturity value comes to Rs.39.52 lakh assuming the fund grows at 8%. The internal rate of return in this case is around 5.85%.
MINT MONEY TAKE
We like the feature that pays the sum assured immediately on death of a policyholder, and subsequently also pays the fund value on maturity. But in terms of cost, there are similar type II Ulips that are a tad cheaper. Also, the insurance amount is fixed at 10 times the annual premium, making the insurance proposition weak. Like with any other Ulip, if you buy this plan, stay with it for the long term.
