SBI Life Unit Plus II Child Plan is one of the most competent products in terms of its cost structure. Investors can choose the funds as per their risk-return appetite
UNIT Plus II Child Plan, launched in December 2009, is an upgraded version of SBI Life's Unit Plus Child Plan with inclusion of two new investment options (funds) — Top 300 and Index fund. Among all child plans in the market, it has the highest net yield. Unlike other unitlinked insurance products (Ulips), Unit Plus II Child Plan offers a couple of funds to choose as per their risk-return appetite. For instance equity, equity optimiser, index, growth fund are equity based, whereas money market and bond fund are debt based. Those looking for balanced portfolio can opt for balanced fund. The plan covers children up to an age of 25 years only.
COST STRUCTURE:
The cost of this product is comparatively lower than the other in the same league. Premium allocation charges totals to only 26% over a period of five years. These charges go nil from the sixth year onwards. Additional premium paid towards investment purposes only (top-ups) are charged at 2% allocation charge. Policy administration charge is also fixed at Rs 600 per annum. This policy has an inbuilt premium waiver benefit rider attached to it at a nominal cost. Under this rider, in case of demise of both the parents, the company pays the entire future premium and hands over the fund accumulated to the child on maturity. Considering these charges, if the fund were to generate returns at 6% and 10 % as mandated by Insurance Regulatory and Development Authority (Irda), the net yield in the hands of investors after considering the above costs would be 4.2% and 7.93% (approx.), respectively per annum. This is fairly higher than 3.49% and 7.2% annualised net return offered by its peer products.
BENEFITS:
Unit Plus II Child plan gives investors choice to opt for a sum assured, between 5X to 20X the annualised premium. The policy also provides varying premium payment options ranging from limited premium payment to regular payment. Also, the policy gives loyalty units on maturity. A few other benefits include:
The plan offers settlement option, under which policyholder can take away the fund value at maturity in five installments. Increase or decrease of sum assured/premium anytime within the policy tenure. Additional riders like accidental death and disability benefit and an inbuilt premium payer waiver benefit rider on payment of additional charge
PERFORMANCE:
SBI Life has been a consistent performer since its launch. Unit Plus II Child plan is a market-linked product and as such its performance is depended on the movements in the stock. Though this plan is a few months old, the funds available for investment have been with the company for a long time. Most of the funds have outperformed their respective benchmarks over the period. Equity fund and balanced fund, which are now fiveand-a-half-year old, have not only outperformed the major market indices but have beaten similar funds from competing companies. In the past five years, the net asset value (NAV) of SBI Life equity fund has grown at compounded annual rate of 26.8% much higher than 20.7% annualised returns given by ICICI Maximiser Fund over the same period. Trends are similar for its balanced fund, which has given returns of 14.7% over 12% of ICICI Balancer Fund. Top 300 and Index funds are new funds launched in January 2010. Though Top 300 performance has been exceptionally good, most of its money is parked in fixed deposits. So, we have to wait for a while as it is difficult to comment on these funds at this stage.
PORTFOLIO REVIEW:
SBI Life Unit Plus II Child plan has an equityoriented basket of funds, which suggests high risk with high returns. The company has low mid-cap equity exposure, except the equity fund which comprises of about 9% funds parked in midcap stocks. The company has high exposure in capital goods and IT sectors. The performance has been hit in the past few months due to its investments in metal and real estate sectors, which are under performing the broader market. It also has small exposure in the healthcare and FMCG sector, which are low beta sectors and doing well currently. According to the fund manager, healthcare faces unique complexities such as regulatory and patent issues, which clouds its future visibility. While the fund manager has asserted frequent churning of the portfolio, the same is restricted to volatile sectors such as metal and real estate. Churning is mostly done in mid-cap stocks rather than large caps.
DEATH/MATURITY BENEFITS:
Upon maturity, the policyholder receives the amount accumulated in the fund. In case of demise of the policyholder (both parents), the nominee (child) receives the sum assured and also gets a waiver in all the future premiums. The insurance company pays premium till maturity, the fund accumulated is given to the nominee (child). For instance, say a 35-year-old healthy male invest Rs 50,000 a year, in Unit Plus II Child Plan for his 10-year-old child, then the maximum tenure he can call for is 15 years with a sum assured to 5 lakh. Assuming the rate of return of 6% and 10%, the fund value will grow up to nearly Rs 10,69,953 and Rs 14,62,095, respectively, receivable at the maturity. In case he dies in the fifth policy year, then the child will receive 5 lakh plus the company will pay the remaining 10 premiums and the accumulated corpus will be then given to the child when he turns 25 years old.
OUR VIEW:
Unit Plus II Child plan is one of the most competent products in terms of its cost structure. Their benefit on eventuality is also quite attractive. Investors with high risk and return can invest in this product, either the equity fund or the equity optimiser fund, as they have a history of good returns. Aviva Young scholar and HDFC Youngstar Super are few other similar products, which the interested investor may study.
