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ULIP Review: Max New York Life College Plan



Max New York Life Insurance has launched a traditional child plan. Many private insurers already have child plans in the unitlinked insurance plan (Ulip) category, which has both debt and equity component. But Max New York Life College Plan is a traditional money back plan which offers bonuses and pays the money back to policyholder at pre-defined stages of the child's life.


MONEY BACK STRUCTURE


The plan offers guaranteed money back aligned towards your child's college education. The plan is structured in such a way that the premium payment term is completed during the school days and money-back stage starts at the age of 18, 19, 20 and 21 as the need is the highest at these stages. The insurer will pay back 40% of the sum assured when the child reaches 18 years and 21 years. It will pay the rest (20% of the sum assured) in the middle years of 19 and 20. The insurer's logic is that the expenses are the highest during the first and the last year of college.

 


REVERSIONARY & TERMINAL BONUS


The product is bundled with dual bonuses – reversionary bonus and terminal bonus. Reversionary bonuses are declared every year from the end of the second year onwards. Usually these bonuses, which are compounded, are a certain percentage of the sum assured, which is decided by the insurer. The insurer may also declare a terminal bonus after the 10th policy anniversary as a percentage of reversionary bonus. But this bonus is payable only once during the policy lifetime.


AN EXPENSIVE AFFAIR


Let us assume a 35-year-old father buys this plan for a sum assured of 1 lakh for his fiveyear-old daughter. The base premium works to 9,067 as per the company's premium table. But since the insurance is on the child's name, the father has to opt for the rider which gives him an insurance cover and the cost works to 335.88. Further, the company has specified a formula to calculate the premium, which includes an addition of 900 to the base premium. After factoring in all the charges, the premium works to 10,302. Given the child is five-years old, the premium payment term works to 13 years and the total premium outgo for a -1 lakh policy works to around 1,33,937 lakh. Sure, there is a guaranteed pay out of 120% of sum assured. Still, it is an expensive affair.


DOWNSIDE


The basic cover is on the child's name which defeats the whole purpose. The parents cover has to be bought at an extra cost.

 

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