Every parent aspires to give the best of everything to their children; be it primary education, a good quality lifestyle, secondary education, lavish wedding etc. Child plans of most insurance companies play on this emotional aspect to push their products. Every parent’s top priority is to fulfil his child’s future dreams and aspirations.
HDFC Standard Life recently launched a new child plan – HDFC YoungStar Super. Let us explore the features of this product. As per the company brochure the following are the details:
|Minimum Age at Entry||18 Years|
|Maximum Age at Entry||65 Years|
|Minimum Term of the Policy||10 Years|
|Maximum Age at Maturity||75 Years|
|Minimum Premium Amount||Rs 15000|
The policy is complaint with the ‘cap on charges’ guidelines for ULIP products issued by IRDA.
In this policy the insurance cover is in the name of the earning parent rather than the child. The policy offer a choice of 2 options to select from in case of unfortunate death of the parent
- Double Benefit: Under this option if the life insured (parent) dies the company will pay the sum assured to the beneficiary. Thereafter the company will waive off all the future premiums to be paid by the family. The company will continue paying 100% of all the future premiums payable towards the policy as and when due, on an annual basis.
- Triple Benefit: Under this option if the life insured (parent) dies the company will pay the sum assured to the beneficiary. Thereafter the company will waive off all the future premiums to be paid by the family. The company will continue paying 50% of all the future premiums payable towards the policy and 50% of the premiums will be paid to the beneficiary as and when due, on an annual basis. The 50% premium amount is paid to the nominee to ensure regular income for the family to meet the regular expenses.
In the first year the premium allocation is 85% for a premium of Rs 15000 – Rs 1,99,000. The Premium Allocation Charge in the 1st year is 15%. This is still high when compared to similar products in the market like Aegon Religare Invest Maximiser Plan which charges only 5% PAC in the 1st year.
In the 2nd Year the premium allocation is 90%
In the 3rd Year the premium allocation is 95%
And from the 4th year onwards the premium allocation is 97%
The Fund Management Charges are 1.25% p.a. charged daily on the fund’s value.
The Policy Administration Charges are Rs 50 per month which will be increased by 5% every year. The policy administration charges are Rs 40 per month (5% increase every year) for Aegon Religare Invest Maximiser Plan.
On maturity; along with the fund value the company will also pay a bonus. This ‘bumper addition’ will depend on the original term of the policy. If the policy term is for 10 years then the bumper addition will be 50% of the original annual premium. If the policy term is for 10+ years then the bumper addition will be 100% of the original annual premium. But the bumper addition will be payable only if there are no partial withdrawals during the term of the policy and all regular premiums have been paid as per the policy terms.
- The company offers 7 funds to select from, where the premium after deducting charges can be invested. These funds offer to invest from 100% in debt to 100% in equity depending on the investor’s risk appetite.
- The premium can be paid yearly, half-yearly or monthly.
- There are 24 switches allowed free in a year.
- The policy holder can choose the sum assured between 5 to 40 times of the annual premium.
- The life insured can also avail the critical illness rider with the policy.
- Premium paid is eligible for tax deduction under Section 80C. The death benefit or the maturity benefit received is tax free under Section 10 (10D) of the Income Tax Act.
While the overall features of the policy are good, investors should opt for insurance only for pure risk cover and invest the remaining investible surplus amount into other investment products like normal mutual funds or ELSS plans, instead of insurance. Individuals should avoid mixing insurance and investments. In the process of doing so you are foregoing an opportunity of investing your surplus money in alternate investments which can earn you comparable or even higher returns. It is an opportunity cost. Also don’t treat the money paid for pure term insurance premium as an expense. View it as an investment to protect your future monthly income or protect your family from financial problems in case something unfortunate happens to you.
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Other Product Reviews that you might be interested in reading about:
LIC Jeevan Nischay - Product Review
Capital Guarantee Products
Aegon Religare iTerm Plan – Term Insurance Product Review
Aegon Religare Invest Maximiser Plan – ULIP Product Review
HDFC Young Star Super – ULIP Product Review
ICICI Advantage Deposit – Fixed Deposit cum Mutual Fund Mix Product Review
Basic Information on Public Provident Fund
Basic Information on Tax Saver Bank Fixed Deposit
National Savings Certificates (VIII) Issue
Kisan Vikas Patra (KVP)
Senior Citizen Saving Scheme (SCSS)
Post Office Monthly Income Scheme (POMIS)
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