Children Money Back Plan

Children Money Back Plan

LIC New Children’s Money Back Plan (Plan / Table no 832) is a new Money back plan from Life Insurance Corporation of India (LIC). LIC has launched this plan on 4th March, 2015. This new money-back plan is a non-linked, with profits and regular premium payment policy. It is a savings cum protection plan.

Before analyzing the details and returns of this new LIC child policy, if you understand how this child plan works, I am sure you as a parent / guardian of your child, may definitely ignore these kind of meaningless plans.

Under this plan, you (parent / guardian) are the proposer. Whereas, your kid’s life is covered. Your baby’s life is insured. Sounds stupid? Yes, generally you would like to have a risk cover on your name/life, so that in case of any unfortunate event, your kid / legal heir/ nominee will receive the claim amount.

In this plan, in any unfortunate event (on kid’s death, can’t even imagine this happening!), you (parent) will receive the death benefits. If kid survives till maturity, he/she will receive the money-back payments (survival benefits) at periodic intervals (after 18 years of child’s age)

Unfortunately, if parent dies, kid will receive all survival benefits, only if ‘Premium Waiver Benefit Rider’ is selected.

Its very disappointing and disheartening to see LIC come up with a bad scheme like this. If you are convinced about my views, you may ignore buying this plan. Need more details?…ok..here you go!

Features of LIC New Children’s Money Back Plan

• Minimum & Maximum Entry Age : 0 to 12 years (Kid’s age)
• Life Assured / Insured : Your kid’s life is insured under this plan
• Proposer’s Minimum / Maximum Age : 18 years / 55 years (Proposer can be Kid’s parent / guardian)
• Policy Term : Maximum upto 25 years of kid’s age. (If kid’s age is 10 years, policy tenure is 15 years)
• Premium Paying Term (PPT) : Maximum upto 25 years. (If kid’s age is 10 years, PPT is 15 years)
• Minimum Sum Assured : Rs 1 Lakh
• Maximum Sum Assured : No limit
• Premium Waiver Benefit Rider (optional) : Available. (LIC’s Premium Waiver Benefit Rider is available as an optional rider on the life of proposer aged between ages 18 to 55 years by payment of additional premium. In case of death of the proposer, the premiums under the basic plan falling due after the date of death shall be waived.)

LIC New Children’s Money Back Plan – Death, Maturity & Survival Benefits details:

• Death Benefit : If death occurs before the commencement of risk, an amount which is equivalent to the premium payments is paid. If death of the proposer occurs after the commencement of risk, death benefit amount which includes ‘Sum Assured on death + Accrued Bonuses + Final Additional Bonus‘ will be paid. (Commencement of risk is linked to kid’s age. If kid’s age is above 8 years, date of commencement of risk is immediate. Sum Assured on death is higher of 10 times of annualized premium or Absolute amount Assured to be paid on Death i.e. Basic Sum Assured.)
• Survival Benefits (Money Back payments) :
  • 20% of Sum Assured is paid when child completes 18 years.
  • 20% of Sum Assured is paid when child completes 20 years.
  • 20% of Sum Assured is paid when child completes 22 years.
  • After the policy matures, maturity amount which includes 40% of sum assured + Accrued Bonuses (vested Simple Reversionary Bonuses) + Final Additional Bonus (FAB – if any) will be paid.

Illustration of LIC New Children’s Money Back Plan

Example : Mr Dev buys LIC’s new children policy. He takes this policy on his kid’s name (newly born baby). Let us now understand how this policy works with the below info-graphic.

New Children’s Money Back Plan – Returns Calculation

This plan defeats the whole purpose of insurance. I believe that there is no need to do in-depth analysis on this plan. JUST IGNORE THIS PLAN!

My Opinion on LIC New Children’s Money Back Plan

Still not convinced? Lets now look at some other important factors. What is the main purpose of investing in child insurance plans? Most of us may say, ‘ I want to secure my child’s future’ (or) I want to accumulate / create a fund to meet my kid’s education or marriage expenses.

We all are aware of the rising costs of higher education. Each year, tuition, books and other expenses increase. Education inflation is definitely in the range of 10% to 15%. Do you agree with me?