IDBI Federal Life Insurance has recently launched a child plan “IDBI Federal Childsurance Dream Builder Insurance Plan”. The plan is targeted to secure children’s future goals like education & marriage. Today providing a good education and establishing a professional career is expensive and will further increases as time goes. Marriages are also no longer a simple affair when it comes to finance. The event has become more expensive over the years and making it important for everyone to sit down and work out the budget well in advance. There is no doubt that every parent would like to fulfil children’s dreams & aspirations. The plan will definitely appeal as it is aimed for child’s secured future.
The plan is regular premium paying unit linked insurance plan in which investment risk is borne by the policy holder. The plan has a minimum premium payment term of 5 years. The minimum premium payable is Rs. 25,000 and maximum is Rs. 1,00,000 in the plan. You can also make top up premium subject to minimum of Rs. 5,000. The plan is available in single life or in joint life, means both the parent can propose the child plan. Minimum entry age of parents is 18 years and child’s is 1 month. Maximum entry age for parents is 65 years and for child is 17 years. The minimum term offered in the plan is 10 years & maximum it is 25 years subject to maximum maturity age which is 75 years. The child will be nominee in the plan and insured person will be single or joint parents. The plan also gives 6 investment options. They are Equity Growth Fund, Mid cap fund, Pure (Equity) Fund, Bond Fund, Income Fund and liquid fund. You can select any single fund or multiple of funds depending on what risk you want to take. It also provides for new fund option called systematic Allocator which will automatically increase debt portion as term comes near to maturity.
The most important part while buying a ULIP is that you must look carefully at all the charges which are applicable in the plan. Plan has discontinuity charge if the premiums are not paid at any time during the first 5 years. The surrender charge is nil after completion of 5 years. The fund management charges are 1.35% for all the funds. The plan has been drafted very neatly by keeping only 1st year allocation charges of 3.15% of the annual premium and there are no allocation charges 2nd year onwards. There is one more charge, policy admin charge which will be levied at 6.30% for first 5 years and 3.15% thereafter. The charge is subject to maximum of Rs. 6,000 p.a. This is again will benefit only to those who pay premium more than Rs. 95,000. Take an example if you start with annual premium will be Rs. 1lakh than the total deduction in the 1st year will be Rs. 9,150 i.e. 3.15% of allocation charge & Rs. 6.000 of the policy admin charge. Second year onwards the deduction will Rs. 6,000 for another 4 years and thereafter if you continue to pay the premium than you have bear the cost of Rs. 3,150 every year 6th year onwards.
These charges will reduce your overall returns. Insurance products are complex and it is not easy for everybody to identify the impact of charges in the plan. The plan makes some sense only if you plan to pay the premiums for the full term of the plan and choose one of the equity funds. The charges in the plan make selection of debt plan unviable. One should also compare mutual fund schemes performance also before opting for the plan.
