FOR the life insurance sector, Ulips, had helped register blockbuster sales till the charges cap came into effect from September 1. Further, even within this category, child Ulips remained the bestsellers, as they benefited from playing on parents' anxiety over securing their children's financial security in their absence. Though sales numbers have turned lacklustre post September 1, child plans, continue to be promoted heavily by insurance companies. The newer versions of Ulips are relatively more investor-friendly, given the lower charges which mean more money in the hands of the policyholders.
Aegon Religare Life Insurance has launched a child Ulip – Rising Star Plan — under the new regime. Like other child plans, this one too of-fers the typical features including premium waiver and income benefit riders.
The plan offers four funds – Secure, Debt, Stable and Accelerator. Be-sides, it also comes with the Invest Protect option, where all premiums are invested in an Accelerator Fund in the initial years of the policy and later switched to stable, secure and debt fund systematically in the last three years of the policy.
The company claims that the product is the best of its kind available in the market as it offers the highest net yield (expected return minus charges). However, financial planners maintain that child Ulips are not necessarily the ideal avenue for securing your child's future, primarily due to the charges, which continue to be high despite the ceiling on charges. A term insurance cover coupled with SIPs in a diversified equity mutual fund is likely to do the job better. For instance, under this product, the policy administration charges amount to 60 per month, and start increasing by 3% every year, second year onwards. The only advantage that child plans may have over this combination is that thanks to the premium-waiver rider, the company continues to pay the premium in the event of the parent's demise, resulting in the fund value on maturity benefiting from the power of compounding. The minimum yearly premium payable under this plan is 20,000 in the annual mode. The minimum age of entry for the parent is 18 years (1 day for the child beneficiary), with 60 years (15 years for the child) being the upper limit. The minimum cover, depending on the parent's age at entry, is 7-10 times the annual premium, while the maximum is 30 times the amount.
