Name of the product
Kotak Life Insurance Co. Ltd’s Headstart Child Assure.
What do you get?
Just like a typical child Ulip, this plan is also a type II Ulip that promises the sum assured to the beneficiary immediately upon the death of the policyholder and waives off all subsequent premiums. The insurer pays all the future premiums upfront and the fund value is paid when the policy finally terminates.
This child policy offers a settlement option in which you choose to receive the maturity proceeds partly in cash and partly in instalments, for up to five years after maturity. For this, you will need to inform the insurer at least three months before the maturity date.
Additionally, this plan discourages any policy alterations after the death of the policyholder. Not only can the beneficiary not make any partial withdrawals, even fund switches are not allowed. However, the beneficiary can choose to surrender or discontinue the policy. If the policy is discontinued, the fund value will be paid only till the time the policy is running.
What are the costs?
The premium allocation charge, which gets deducted from your premium before any money gets invested, is applicable throughout the term and ranges between 4% and 6%, depending upon the premium amount chosen. For instance, the premium allocation charge for annual premiums ranging from Rs 20,000 to Rs 2 lakh is 6% of the annual premium in the first year. Subsequently, it is the same for all premium amounts; 3% till the fifth year and 2% from the sixth year. The policy administration charge is at 0.25% of the annual premium subject to a maximum of Rs 500 per month. However, for annual premiums above Rs 10 lakh, there is no policy allocation charge. The fund management charge is fixed at 1.35%. The mortality charge depends on the age, term and sum assured chosen.
Assuming a 35-year-old takes a policy with a premium of Rs 1 lakh for a sum assured of Rs 15 lakh over a 20-year term, the maturity value will come to around Rs 44.51 lakh if the fund grows at 10%. This means the internal rate of return (IRR) of this policy is 7.12%.
Mint Money take
There are products that are better taking the IRR parameter.